Item 16. Form 10-K Summary.

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Item 16. Form 10-K Summary.

None.

DAVITA INC.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and which includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

During the last fiscal year, the Company conducted an evaluation, under the oversight of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s internal control over financial reporting. This evaluation was completed based on the criteria established in the report titled “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based upon our evaluation under the COSO framework, we have concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.

The Company’s independent registered public accounting firm, KPMG LLP, has issued an attestation report on the Company’s internal control over financial reporting, which report is included in this Annual Report.

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

DaVita Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of DaVita Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flow for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement Schedule II – Valuation and Qualifying Accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 12, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 14 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of the Financial Accounting Standards Board’s Accounting Standards Codification Topic 842 Leases.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

U.S. dialysis patient service revenue recognition

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company recognized $10,619 million in U.S. dialysis patient service revenue for the year ended December 31, 2020. There are uncertainties associated with estimating U.S. dialysis patient service revenue, which generally take several years to resolve. As these estimates are refined over time, both positive and negative adjustments are recognized in the current period.

F-2

We identified the evaluation of the recognition of the transaction price the Company expects to collect as a result of satisfying its performance obligations related to U.S. dialysis patient service revenue as a critical audit matter because it involves estimation that requires complex auditor judgment. The key assumptions and inputs used to estimate the transaction price relate to ongoing insurance coverage changes, differing interpretations of contract coverage, determination of applicable primary and secondary coverage, coordination of benefits, and varying patient characteristics impacting Medicare reimbursements. Changes to the key assumptions and inputs used in the application of the methodology may have a significant effect on the Company’s determination of the estimate.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s U.S. dialysis patient service revenue recognition process, including controls related to the application of the methodology used to estimate the transaction price, and the key assumptions and inputs. We evaluated the Company’s key assumptions and inputs to estimate the transaction price the Company expects to collect as a result of satisfying its performance obligations by comparing key assumptions to historical collection experience, trends of refunds and payor payment adjustments, delays in the Company’s billing and collection process and regulatory compliance matters. Additionally, we compared U.S. dialysis patient service revenue related to the transaction price estimates recognized in prior periods to actual cash collections related to performance obligations satisfied in prior periods to analyze the Company’s ability to estimate the transaction price the Company expects to collect as a result of satisfying its performance obligations. We developed an estimate of U.S. dialysis patient service revenue based on actual and expected cash collections and compared to U.S. dialysis patient service revenue recorded by the Company for the year-ended December 31, 2020.

Evaluation of the goodwill impairment analyses for the Germany kidney care reporting unit

As discussed in Note 10 to the consolidated financial statements, the Company performed annual and other impairment assessments for their reporting units throughout 2020. As a result of these assessments, the Company has not recognized any goodwill impairment charges in the current year. The goodwill balance for the Germany kidney care reporting unit as of December 31, 2020 was $323 million.

We have identified the evaluation of the goodwill impairment analyses for the Germany kidney care reporting unit as a critical audit matter. The evaluations involved assessing the key assumptions used in estimating the fair value of the reporting unit, including non-acquired patient growth rate, projected number of treatments, projected revenue growth rate, discount rates, and revenue and clinical earnings before interest, taxes, depreciation, and amortization (EBITDA) multiples. Evaluation of these key assumptions involved a high degree of subjectivity and auditor judgment as changes to these assumptions could have a significant impact on any goodwill impairment charges recognized.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment assessment process, including controls over the development of key assumptions as described above. We assessed the Company’s ability to forecast by comparing prior year actual results of the reporting unit to previously forecasted amounts for the reporting unit. We evaluated the Company’s non-acquired patient growth rate, projected number of treatments, and projected revenue growth rate, for the reporting unit by comparing the projections to the Company’s underlying business strategies and operating plans for the reporting unit, and other industry and market data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

evaluating the projected revenue growth rate for the reporting unit by comparing projected rates with comparable companies
evaluating the discount rate for the reporting unit, by comparing the inputs used to develop the discount rate to publicly available market data for comparable companies to assess whether the inputs used in the development of the discount rate are reasonable
evaluating the revenue and clinical EBITDA multiples utilized in the Company’s valuation of the reporting unit by comparing the multiples selected to a range of multiples from comparable transactions.

Evaluation of legal proceedings and regulatory matters

As discussed in Notes 1 and 16 to the consolidated financial statements, the Company operates in a highly regulated industry and is a party to various lawsuits, demands, claims, qui tam suits, governmental investigations and audits (including, without limitation, investigations or other actions resulting from its obligation to self-report suspected violations of law) and other legal proceedings. The Company records accruals for certain legal proceedings and regulatory matters to the extent an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

F-3

We identified the evaluation of legal proceedings and regulatory matters as a critical audit matter. Due to the nature of the legal proceedings and regulatory matters, a high degree of subjectivity was required in evaluating the completeness of the Company’s population of legal proceedings and regulatory matters. Additionally, complex auditor judgment was required in evaluating the Company’s probability of outcome assessment, and related disclosures.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s legal proceedings and regulatory matters process. This includes controls over the Company’s determination of the completeness of the population of legal proceedings and regulatory matters, as well as controls over the Company’s probability of outcome assessment, and related disclosures. We tested existing legal proceedings and regulatory matters by reading certain written correspondence received from outside parties as well as reading certain written responses provided to outside parties. We read letters received directly from the Company’s external and internal legal counsel that described certain legal proceedings and regulatory matters. We involved forensic professionals with specialized skills and knowledge who inspected the Company’s compliance case log. Additionally, we assessed the completeness of the population of legal proceedings and regulatory matters and related disclosures by 1) inquiring of certain key executives and directors and 2) evaluating information received through procedures described above and through publicly available information about the Company, its competitors, and the industry.

/s/ KPMG LLP

We have served as the Company’s auditor since 2000.

Seattle, Washington

February 12, 2021

F-4

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

DaVita Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited DaVita Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flow for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement Schedule II – Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 12, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Seattle, Washington

February 12, 2021

F-5

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars and shares in thousands, except per share data)


	Year ended December 31,
	2020		2019		2018
Dialysis patient service revenues before provision	$	11,039,709	$	10,918,421	$	10,709,981
Provision for uncollectible accounts	(13,458)		(21,715)		(49,587)
Dialysis patient service revenues	11,026,251		10,896,706		10,660,394
Other revenues	524,353		491,773		744,457
Total revenues	11,550,604		11,388,479		11,404,851
Operating expenses and charges:
Patient care costs	7,988,613		7,914,485		8,195,513
General and administrative	1,247,584		1,103,312		1,135,454
Depreciation and amortization	630,435		615,152		591,035
Provision for uncollectible accounts	—		—		(7,300)
Equity investment (income) loss	(26,916)		(12,679)		4,484
Other asset impairments	—		—		17,338
Goodwill impairment charges	—		124,892		3,106
Loss (gain) on changes in ownership interest, net	16,252		—		(60,603)

Total operating expenses and charges	9,855,968		9,745,162		9,879,027
Operating income	1,694,636		1,643,317		1,525,824
Debt expense	(304,111)		(443,824)		(487,435)
Debt prepayment, refinancing and redemption charges	(89,022)		(33,402)		—
Other income, net	16,759		29,348		10,089
Income from continuing operations before income taxes	1,318,262		1,195,439		1,048,478
Income tax expense	313,932		279,628		258,400
Net income from continuing operations	1,004,330		915,811		790,078
Net (loss) income from discontinued operations, net of tax	(9,653)		105,483		(457,038)
Net income	994,677		1,021,294		333,040
Less: Net income attributable to noncontrolling interests	(221,035)		(210,313)		(173,646)
Net income attributable to DaVita Inc.	$	773,642	$	810,981	$	159,394

Earnings per share attributable to DaVita Inc.:
Basic net income from continuing operations	$	6.54	$	4.61	$	3.66
Basic net income	$	6.46	$	5.29	$	0.93
Diluted net income from continuing operations	$	6.39	$	4.60	$	3.62
Diluted net income	$	6.31	$	5.27	$	0.92

Weighted average shares for earnings per share:
Basic shares	119,797		153,181		170,786
Diluted shares	122,623		153,812		172,365

Amounts attributable to DaVita Inc.:
Net income from continuing operations	$	783,295	$	706,832	$	624,321
Net (loss) income from discontinued operations	(9,653)		104,149		(464,927)
Net income attributable to DaVita Inc.	$	773,642	$	810,981	$	159,394

See notes to consolidated financial statements.

F-6

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)


	Year ended December 31,
	2020		2019		2018
Net income	$	994,677	$	1,021,294	$	333,040
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on interest rate cap agreements:
Unrealized (losses) gains	(16,346)		1,151		(133)
Reclassification into net income	5,313		6,377		6,286
Unrealized losses on foreign currency translation	(7,623)		(20,102)		(45,944)
Other comprehensive loss	(18,656)		(12,574)		(39,791)
Total comprehensive income	976,021		1,008,720		293,249
Less: Comprehensive income attributable to noncontrolling interests	(221,035)		(210,313)		(173,646)
Comprehensive income attributable to DaVita Inc.	$	754,986	$	798,407	$	119,603

See notes to consolidated financial statements.

F-7

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(dollars and shares in thousands, except per share data)


	December 31, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	324,958	$	1,102,372
Restricted cash and equivalents	176,832		106,346
Short-term investments	20,101		11,572
Accounts receivable	1,824,282		1,795,598
Inventories	111,625		97,949
Other receivables	544,376		489,695
Prepaid and other current assets	76,387		66,866
Income tax receivable	70,163		19,772
Total current assets	3,148,724		3,690,170
Property and equipment, net of accumulated depreciation	3,521,824		3,473,384
Operating lease right-of-use assets	2,863,089		2,830,047
Intangible assets, net of accumulated amortization	166,585		135,684
Equity method and other investments	257,491		241,983
Long-term investments	32,193		36,519
Other long-term assets	79,501		115,972
Goodwill	6,919,109		6,787,635
	$	16,988,516	$	17,311,394
LIABILITIES AND EQUITY
Accounts payable	$	434,253	$	403,840
Other liabilities	810,529		756,174
Accrued compensation and benefits	685,555		695,052
Current portion of operating lease liabilities	369,497		343,912
Current portion of long-term debt	168,541		130,708
Income tax payable	7,768		42,412
Total current liabilities	2,476,143		2,372,098
Long-term operating lease liabilities	2,738,670		2,723,800
Long-term debt	7,917,263		7,977,526
Other long-term liabilities	150,060		160,809
Deferred income taxes	809,600		577,543
Total liabilities	14,091,736		13,811,776
Commitments and contingencies
Noncontrolling interests subject to put provisions	1,330,028		1,180,376
Equity:
Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)	—		—
Common stock ($0.001 par value, 450,000 shares authorized; 109,933 and 125,843 shares issued and outstanding at December 31, 2020 and 2019, respectively)	110		126
Additional paid-in capital	597,073		749,043
Retained earnings	852,537		1,431,738
Accumulated other comprehensive loss	(66,154)		(47,498)
Total DaVita Inc. shareholders' equity	1,383,566		2,133,409
Noncontrolling interests not subject to put provisions	183,186		185,833
Total equity	1,566,752		2,319,242
	$	16,988,516	$	17,311,394

See notes to consolidated financial statements.

F-8

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in thousands)


	Year ended December 31,
	2020		2019		2018
Cash flows from operating activities:
Net income	$	994,677	$	1,021,294	$	333,040
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	630,435		615,152		591,035
Impairment charges	—		124,892		61,981
Valuation adjustment on disposal group	—		—		316,840
Debt prepayment, refinancing and redemption charges	86,957		33,402		—
Stock-based compensation expense	91,458		67,850		73,061
Deferred income taxes	240,848		41,723		273,660
Equity investment income, net	13,830		8,582		26,449
Loss (gain) on sales of business interests, net	24,248		23,022		(85,699)
Other non-cash charges, net	747		49,579		82,374
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	(21,087)		(79,957)		(81,176)
Inventories	(12,349)		10,158		73,505
Other receivables and other current assets	(79,277)		2,790		236,995
Other long-term assets	(6,123)		6,965		3,497
Accounts payable	37,200		(84,539)		(35,959)
Accrued compensation and benefits	(20,931)		(14,697)		84,165
Other current liabilities	105,637		181,940		(157,462)
Income taxes	(87,391)		95,645		(23,635)
Other long-term liabilities	(19,851)		(31,446)		(1,031)
Net cash provided by operating activities	1,979,028		2,072,355		1,771,640
Cash flows from investing activities:
Additions of property and equipment	(674,541)		(766,546)		(987,138)
Acquisitions	(182,013)		(100,861)		(183,156)
Proceeds from asset and business sales	50,139		3,877,392		150,205
Purchase of debt investments held-to-maturity	(150,701)		(101,462)		(5,963)
Purchase of other debt and equity investments	(3,757)		(5,458)		(8,448)
Proceeds from debt investments held-to-maturity	151,213		95,376		34,862
Proceeds from sale of other debt and equity investments	3,491		3,676		9,526
Purchase of equity method investments	(22,341)		(9,366)		(19,177)
Distributions from equity method investments	3,139		2,589		3,646
Net cash (used in) provided by investing activities	(825,371)		2,995,340		(1,005,643)
Cash flows from financing activities:
Borrowings	4,046,775		38,525,850		59,934,750
Payments on long-term debt	(4,110,304)		(40,520,722)		(59,234,946)
Deferred financing and debt redemption costs	(105,848)		(85,319)		(5,027)
Purchase of treasury stock	(1,458,442)		(2,383,816)		(1,161,511)
Distributions to noncontrolling interests	(253,118)		(233,123)		(196,441)
Net (payments) receipts related to stock purchases and awards	(975)		11,382		13,577
Contributions from noncontrolling interests	42,966		57,317		52,311
Proceeds from sales of additional noncontrolling interest	—		—		15
Purchases of noncontrolling interests	(7,831)		(68,019)		(28,082)
Net cash used in financing activities	(1,846,777)		(4,696,450)		(625,354)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(13,808)		(1,760)		(3,350)
Net (decrease) increase in cash, cash equivalents and restricted cash	(706,928)		369,485		137,293
Less: Net (decrease) increase in cash, cash equivalents and restricted cash from discontinued operations	—		(423,813)		240,793
Net (decrease) increase in cash, cash equivalents and restricted cash from continuing operations	(706,928)		793,298		(103,500)
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year	1,208,718		415,420		518,920
Cash, cash equivalents and restricted cash of continuing operations at end of the year	$	501,790	$	1,208,718	$	415,420

See notes to consolidated financial statements.

F-9

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(dollars and shares in thousands)


	Non-controlling interests subject to put provisions			DaVita Inc. Shareholders' Equity																			Non-controlling interests not subject to put provisions
								Additional paid-in capital			Retained earnings							Accumulated other comprehensive income (loss)
			Common stock								Treasury stock
			Shares		Amount						Shares			Amount		Total
Balance at December 31, 2017	$	1,011,360		182,462		$	182		$	1,042,899		$	3,633,713		—	$	—		$	13,235	$	4,690,029	$	196,037
Cumulative effect of change in accounting principle												8,368							(8,368)		—
Comprehensive income:
Net income	105,531											159,394									159,394		68,115
Other comprehensive income																			(39,791)		(39,791)
Stock purchase plan				398		—			17,398												17,398
Stock award plan				371		1			(5,335)												(5,334)
Stock-settled stock-based compensation expense									73,081												73,081
Changes in noncontrolling interest from:
Distributions	(119,173)																						(77,268)
Contributions	32,918																						19,393
Acquisitions and divestitures	79,078								3,546												3,546		318
Partial purchases	(8,546)								(17,897)												(17,897)		(1,639)
Fair value remeasurements	23,473								(23,473)												(23,473)
Purchase of treasury stock															(16,844)	(1,153,511)					(1,153,511)
Retirement of treasury stock				(16,844)		(17)			(95,213)			(1,058,281)			16,844	1,153,511					—
Balance at December 31, 2018	$	1,124,641		166,387		$	166		$	995,006		$	2,743,194		—	$	—		$	(34,924)	$	3,703,442	$	204,956
Cumulative effect of change in accounting principle	(38)											39,876									39,876		(6)
Comprehensive income:
Net income	143,413											810,981									810,981		66,900
Other comprehensive income																			(12,574)		(12,574)
Stock purchase plan				315		1			16,569												16,570
Stock award plan				161		—			(3,290)												(3,290)
Stock-settled stock-based compensation expense									67,549												67,549
Changes in noncontrolling interest from:
Distributions	(155,011)																						(78,112)
Contributions	35,572																						21,745
Acquisitions and divestitures	(6,332)																						(10,170)
Partial purchases	(11,394)								(37,145)												(37,145)		(19,480)
Fair value remeasurements	49,525								(49,525)												(49,525)
Purchase of treasury stock															(41,020)	(2,402,475)					(2,402,475)
Retirement of treasury stock				(41,020)		(41)			(240,121)			(2,162,313)			41,020	2,402,475					—
Balance at December 31, 2019	$	1,180,376		125,843		$	126		$	749,043		$	1,431,738		—	$	—		$	(47,498)	$	2,133,409	$	185,833

F-10

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY - continued

(dollars and shares in thousands)


	Non-controlling interests subject to put provisions		DaVita Inc. Shareholders' Equity															Non-controlling interests not subject to put provisions
				Additional paid-in capital		Retained earnings						Accumulated other comprehensive income (loss)
	Common stock					Treasury stock
	Shares		Amount			Shares		Amount			Total
Balance at December 31, 2019	$	1,180,376	125,843	$	126	$	749,043	$	1,431,738	—		$	—	$	(47,498)	$	2,133,409	$	185,833
Comprehensive income:
Net income	141,879							773,642								773,642		79,156
Other comprehensive income														(18,656)		(18,656)
Stock purchase plan			222	—		17,148										17,148
Stock award plans			345	—		(17,801)										(17,801)
Stock-settled stock-based compensation expense						90,007										90,007
Changes in noncontrolling interest from:
Distributions	(163,175)																	(89,943)
Contributions	30,154																	12,812
Acquisitions and divestitures	(3,215)																	(248)
Partial purchases	(7,771)					4,364										4,364		(4,424)
Fair value remeasurements	151,780					(151,780)										(151,780)
Purchase of treasury stock										(16,477)		(1,446,767)				(1,446,767)
Retirement of treasury stock			(16,477)	(16)		(93,908)		(1,352,843)		16,477		1,446,767				—
Balance at December 31, 2020	$	1,330,028	109,933	$	110	$	597,073	$	852,537	—		$	—	$	(66,154)	$	1,383,566	$	183,186

See notes to consolidated financial statements.

F-11

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

1. Organization and summary of significant accounting policies

Organization

The Company's operations are comprised of its dialysis and related lab services to patients in the United States (its U.S. dialysis business), its ancillary services and strategic initiatives including its international operations (collectively, its ancillary services), and its corporate administrative support.

The Company’s largest line of business is its U.S. dialysis business, which operates kidney dialysis centers in the U.S. for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). As of December 31, 2020, the Company operated or provided administrative services through a network of 2,816 U.S. outpatient dialysis centers in 46 states and the District of Columbia, serving a total of approximately 204,200 patients. In addition, as of December 31, 2020, the Company operated or provided administrative services to a total of 321 outpatient dialysis centers serving approximately 36,200 patients located in ten countries outside of the U.S.

On June 19, 2019, the Company completed the sale of its DaVita Medical Group (DMG) business to Collaborative Care Holdings, LLC (Optum), a subsidiary of UnitedHealth Group Inc. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented in these consolidated financial statements. For financial information about the DMG business, see Note 22.

The Company’s U.S. dialysis business qualifies as a separately reportable segment and the Company’s ancillary services, including its international operations, have been combined and disclosed in the other segments category.

Basis of presentation

These consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The financial statements include DaVita Inc. and its subsidiaries, partnerships and other entities in which it maintains a majority voting or other controlling financial interest (collectively, the Company). All significant intercompany transactions and balances have been eliminated. Equity investments in investees over which the Company only has significant influence are recorded on the equity method, while investments in other equity securities are recorded at fair value or on the adjusted cost method, as applicable. For the Company’s international subsidiaries, local currencies are considered their functional currencies. Translation adjustments result from translating the financial statements of the Company’s international subsidiaries from their functional currencies into the Company’s reporting currency (the U.S. dollar, or USD). Prior year classifications have been conformed to the current year presentation.

The Company has evaluated subsequent events through the date these consolidated financial statements were issued and has included all necessary adjustments and disclosures.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, contingencies and noncontrolling interests subject to put provisions. Although actual results in subsequent periods will differ from these estimates, such estimates are developed based on the best information available to management and management’s best judgments at the time. All significant assumptions and estimates underlying the amounts reported in the financial statements and accompanying notes are regularly reviewed and updated when necessary. Changes in estimates are reflected in the financial statements based upon on-going actual experience trends or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies.

The most significant assumptions and estimates underlying these consolidated financial statements and accompanying notes involve revenue recognition and accounts receivable, impairments of goodwill, accounting for income taxes, fair value estimates and loss contingencies. Specific estimating risks and contingencies are further addressed within these notes to the consolidated financial statements.

Revenues

On January 1, 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 606 Revenue from Contracts with Customers (Topic 606) using the cumulative effect method for those contracts that were not substantially completed as of January 1, 2018. Results for reporting periods beginning on and after January 1, 2018 are presented under Topic 606.

F-12

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

The adoption of this new standard primarily changed the Company’s presentation of revenues, provision for uncollectible accounts and allowance for doubtful accounts. Topic 606 requires revenue to be recognized based on the Company’s estimate of the transaction price the Company expects to collect as a result of satisfying its performance obligations. Accordingly, for performance obligations satisfied after the adoption of Topic 606, the Company no longer separately presents a provision for uncollectible accounts on the consolidated income statement and no longer presents the related allowance for doubtful accounts on the consolidated balance sheet. However, as a result of the Company’s election to apply Topic 606 only to contracts not substantially completed as of January 1, 2018, the Company continued to maintain an allowance for doubtful accounts related to performance obligations satisfied prior to the adoption of Topic 606. Net collections or write-offs of accounts receivable generated prior to January 1, 2018, beyond amounts previously reserved thereon, are presented in the provision for uncollectible accounts on the consolidated income statement in accordance with Topic 605.

Dialysis patient service revenues

Revenues are recognized based on the Company’s estimate of the transaction price the Company expects to collect as a result of satisfying its performance obligations. Dialysis patient service revenues are recognized in the period services are provided based on these estimates. Revenues consist primarily of payments from government and commercial health plans for dialysis services provided to patients. A usual and customary fee schedule is maintained for the Company’s dialysis treatments and related lab services; however, actual collectible revenue is normally recognized at a discount from the fee schedule.

Revenues associated with Medicare and Medicaid programs are estimated based on: (a) the payment rates that are established by statute or regulation for the portion of payment rates paid by the government payor (e.g., 80% for Medicare patients) and (b) for the portion not paid by the primary government payor, estimates of the amounts ultimately collectible from other government programs providing secondary coverage (e.g., Medicaid secondary coverage), the patient’s commercial health plan secondary coverage, or the patient.

Under Medicare’s bundled payment rate system, services covered by Medicare are subject to estimating risk, whereby reimbursements from Medicare can vary significantly depending upon certain patient characteristics and other variable factors. Even with the bundled payment rate system, Medicare payments for bad debt claims as established by cost reports require evidence of collection efforts. As a result, billing and collection of Medicare bad debt claims can be delayed significantly and final payment is subject to audit. The Company’s revenue recognition is estimated based on its judgment regarding its ability to collect, which depends upon its ability to effectively capture, document and bill for Medicare’s base payment rate as well as these other variable factors.

Medicaid payments, when Medicaid coverage is secondary, can also be difficult to estimate. For many states, Medicaid payment terms and methods differ from Medicare, and may prevent accurate estimation of individual payment amounts prior to billing.

Revenues associated with commercial health plans are estimated based on contractual terms for the patients under healthcare plans with which the Company has formal agreements, non-contracted health plan coverage terms if known, estimated secondary collections, historical collection experience, historical trends of refunds and payor payment adjustments (retractions), inefficiencies in the Company’s billing and collection processes that can result in denied claims for payments, delays in collections due to payor payment inefficiencies, and regulatory compliance matters.

Commercial revenue recognition also involves significant estimating risks. With many larger commercial insurers, the Company has several different contracts and payment arrangements, and these contracts often include only a subset of the Company’s centers. In certain circumstances, it may not be possible to determine which contract, if any, should be applied prior to billing. In addition, for services provided by non-contracted centers, final collection may require specific negotiation of a payment amount, typically at a significant discount from the Company’s usual and customary rates.

Other revenues

Other revenues consist of fees for management and administrative support services provided to outpatient dialysis businesses that the Company does not own or in which the Company owns a noncontrolling interest as well as revenues associated with the Company's non-dialysis ancillary services and strategic initiatives. Revenues associated with dialysis management services, integrated care services, clinical research programs, physician services, and ESRD seamless care organizations are estimated in the period services are provided. Revenues associated with pharmacy services until that business was closed in 2018 were estimated as prescriptions were filled and shipped to patients. Revenues associated with direct primary care until that business was sold in 2018 were estimated over the membership period.

F-13

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Other income

Other income includes interest income on cash and cash equivalents and short- and long-term investments, realized and unrealized gains and losses recognized on investments, and foreign currency transaction gains and losses.

Cash and cash equivalents

Cash equivalents are short-term highly liquid investments readily convertible to known amounts of cash that typically mature within three months or less at date of purchase.

Restricted cash and equivalents

Restricted cash and cash equivalents include funds held in trust to satisfy insurer and state regulatory requirements related to wholly-owned captive insurance companies that bear professional and general liability and workers' compensation risks for the Company as well as funds held in escrow for certain legal settlements pending finalization.

Investments in debt and equity securities

The Company classifies certain debt securities as held-to-maturity and records them at amortized cost based on the Company’s intentions and strategies concerning those investments. Equity securities that have readily determinable fair values or redemption values are recorded at estimated fair value with changes in fair value recognized in current earnings within "Other income, net". These debt and equity investments are classified as "short-term investments" or "long-term investments" on the Company's consolidated balance sheet. See Note 5 for further details.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consist principally of pharmaceuticals and dialysis-related supplies. Rebates related to inventory purchases are recorded when earned and are based on certain qualification requirements which are dependent on a variety of factors including future pricing levels from the manufacturer and related data submission.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and amortization and is further reduced by any impairments. Maintenance and repairs are charged to expense as incurred. Disposition gains and losses are included in current operating expenses. Property and equipment assets are reviewed for possible impairment whenever significant events or changes in circumstances indicate that an impairment may have occurred.

Leases

The Company leases substantially all of its U.S. dialysis facilities. The majority of the Company’s facilities are leased under non-cancellable operating leases which contain renewal options. These renewal options are included in the Company's determination of the right-of-use assets and related lease liabilities when renewal is considered reasonably certain at the commencement date. Certain of the Company's leases are subject to periodic consumer price increases or contain fixed escalation clauses.

The Company categorizes leases with contractual terms longer than twelve months as either operating or finance leases. Finance leases are generally those leases that allow the Company to substantially utilize or pay for the entire asset over its estimated life. All other leases are categorized as operating leases. The Company has elected the practical expedient to not separate lease components from non-lease components for its financing and operating leases. The Company has also elected the short-term lease recognition exemption and does not recognize right-of-use assets or lease liabilities for leases with a term of less than 12 months.

Financing and operating right-of-use assets are recognized based on the net present value of lease payments over the lease term plus expected renewals as of the commencement date. Since most of the Company's leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on information available at the commencement date or remeasurement date in determining the present value of lease payments.

Assets acquired under finance leases are recorded on the balance sheet within property and equipment, net and liabilities for finance lease obligations are recorded within long-term debt. Finance lease assets are amortized to depreciation expense on a straight-line basis over the shorter of their estimated useful lives or the expected lease term.

F-14

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Rights to use assets under operating leases are recorded on the balance sheet as operating lease right-of-use assets and liabilities for operating lease obligations are recorded as operating lease liabilities. Reductions in the carrying amount of operating lease right-of-use assets are recorded to rent expense over the lease term.

Amortizable intangibles

Amortizable intangible assets include noncompetition agreements, hospital service contracts, and customer relationships arising from other service contracts, each of which have finite useful lives. Amortization expense is computed using the straight-line method over the useful lives of the assets estimated as follows: non-competition agreements and hospital acute service contracts over the contract term, and customer relationships from other service contracts over the remaining contract term plus expected renewal periods. Amortizable intangible assets are reviewed for possible impairment whenever significant events or changes in circumstances indicate that an impairment may have occurred.

Indefinite-lived intangibles

Indefinite-lived intangible assets include international licenses and accreditations that allow the Company to be reimbursed for providing dialysis services to patients, each of which has an indefinite useful life. Indefinite-lived intangibles are not amortized, but are assessed for impairment at least annually and whenever significant events or changes in circumstances indicate that an impairment may have occurred. Costs to renew indefinite-lived intangible assets are expensed as incurred.

Equity method and other investments

Equity investments that do not have readily determinable fair values are carried on the equity method if the Company maintains significant influence over the investee. Equity investments without readily determinable fair values for which the Company does not maintain significant influence over the investee are carried either at estimated fair value or on the adjusted cost method, as determined on an investment-specific basis. The adjusted cost method represents the Company's cost for an investment, net of any other-than-temporary impairments, as adjusted for any subsequent observation of the investment's fair value. These equity method and adjusted cost method investments are classified as “Equity method and other investments” on the Company's consolidated balance sheet. See Note 9 for further details.

Equity method and other investments are assessed for other-than-temporary impairment when significant events or changes in circumstances indicate that an other-than-temporary impairment may have occurred. An other-than-temporary impairment charge is recorded when the fair value of an investment has fallen below its carrying amount and the shortfall is expected to be indefinitely or permanently unrecoverable.

Goodwill

Goodwill represents the difference between the fair value of businesses acquired and the fair value of the identifiable tangible and intangible net assets acquired. Goodwill is not amortized, but is assessed by individual reporting unit for impairment as circumstances warrant and at least annually. An impairment charge is recognized when and to the extent a reporting unit's carrying amount is determined to exceed its fair value. The Company operates multiple reporting units. See Note 10 for further details.

Self-insurance

The Company predominantly self-insures its professional and general liability and workers' compensation risks through its wholly-owned captive insurance companies, with excess or reinsurance coverage for additional protection. The Company is also predominantly self-insured with respect to employee medical and other health benefits. The Company records insurance liabilities for the professional and general liability, workers’ compensation, and employee health benefit risks that it retains and estimates its liability for those risks using third party actuarial calculations that are based upon historical claims experience and expectations for future claims.

Income taxes

Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not currently have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in the recognition of tax positions and any changes in the valuation allowance caused by a change in judgment about

F-15

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

The Company uses a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the financial statements.

Stock-based compensation

The Company’s stock-based compensation expense for stock-settled awards is measured at the estimated fair value of awards on the date of grant and recognized on a cumulative straight-line basis over the vesting terms of the awards, unless the stock awards are based on non-market based performance metrics, in which case expense is adjusted for the ultimate number of shares expected to be issued as of the end of each reporting period. Stock-based compensation expense for cash-settled awards is based on their estimated fair values as of the end of each reporting period. The expense for all stock-based awards is recognized net of expected forfeitures.

Interest rate cap agreements

The Company often carries a combination of current or forward interest rate caps on portions of its variable rate debt as a means of hedging its exposure to changes in LIBOR interest rates as part of its overall interest rate risk management strategy. These interest rate caps are not held for trading or speculative purposes and are designated as qualifying cash flow hedges. See Note 13 for further details.

Noncontrolling interests

Noncontrolling interests represent third-party equity ownership interests in entities which are consolidated by the Company for financial statement reporting purposes. As of December 31, 2020, third parties held noncontrolling equity interests in 688 consolidated legal entities.

Fair value estimates

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are determined based on the principal or most advantageous market for the item being measured, assume that buyers and sellers are independent, willing and able to transact, and knowledgeable, with access to all information customarily available in such a transaction, and are based on assumptions that market participants would use in pricing the item, not assumptions specific to the reporting entity.

The Company relies on fair value measurements and estimates for purposes that require the recording, reassessment, or adjustment of the carrying amounts of certain assets, liabilities, and noncontrolling interests subject to put provisions (redeemable equity interests classified as temporary equity). These purposes can include the accounting for business combination transactions; impairment assessments for goodwill, other intangible assets, or other long-lived assets; recurrent revaluation of investments in debt and equity securities, contingent earn-out obligations, interest rate cap agreements, and noncontrolling interests subject to put provisions; and the accounting for equity method and other investments and stock-based compensation, as applicable. The Company has also classified its assets, liabilities and temporary equity into the appropriate fair value hierarchy levels as defined by the FASB. See Note 24 for further details.

New accounting standards

New standards recently adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU amend the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments and off-balance sheet credit exposures. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. The amendments in this ASU became effective for the Company beginning on January 1, 2020 and were applied using a modified retrospective basis. The adoption of ASU No. 2016-13 did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement. The applicable amendments in this ASU remove requirements for disclosures concerning transfers between fair value measurement levels 1, 2 and 3 and disclosures concerning

F-16

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

valuation processes for level 3 fair value measurements. The applicable amendments in this ASU also add a requirement to separately disclose the changes in unrealized gains and losses included in other comprehensive income for the reporting period for level 3 items measured at fair value on a recurring basis, and require disclosure of the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements. The amendments in this ASU became effective for the Company beginning on January 1, 2020 and were applied on a prospective basis. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this ASU as of January 1, 2020, using the prospective transition approach, which allows the Company to change the accounting method without restating prior periods or booking cumulative adjustments. The adoption of ASU No. 2018-15 did not have a material impact on the Company's consolidated financial statements.

New standards not yet adopted

In December 2019, the FASB issued ASU 2019-12*, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes*. ASU 2019-12 attempts to simplify aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted for all entities. The Company has evaluated the impact of this standard on its consolidated financial statements, including accounting policies, processes, and systems, and does not expect the impact to be material.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in this ASU were effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently assessing the effect this guidance may have on its consolidated financial statements.

2. Revenue recognition and accounts receivable

The Company's revenues by segment and primary payor source were as follows:


	Year ended December 31, 2020
	U.S. dialysis		Other - Ancillary services		Consolidated
Patient service revenues:
Medicare and Medicare Advantage	$	6,048,043	$		$	6,048,043
Medicaid and Managed Medicaid	744,862				744,862
Other government	455,897		380,584		836,481
Commercial	3,370,562		170,394		3,540,956
Other revenues:
Medicare and Medicare Advantage			419,662		419,662
Medicaid and Managed Medicaid			1,227		1,227
Commercial			33,246		33,246
Other(1)	40,571		47,585		88,156
Eliminations of intersegment revenues	(145,286)		(16,743)		(162,029)
Total	$	10,514,649	$	1,035,955	$	11,550,604

(1)Other consists of management service fees earned in the respective Company line of business as well as other revenue from the Company's ancillary services.

F-17

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)


	Year ended December 31, 2019
	U.S. dialysis		Other - Ancillary services		Consolidated
Patient service revenues:
Medicare and Medicare Advantage	$	6,129,697	$		$	6,129,697
Medicaid and Managed Medicaid	669,089				669,089
Other government	446,010		352,765		798,775
Commercial	3,286,089		144,256		3,430,345
Other revenues:
Medicare and Medicare Advantage			264,538		264,538
Medicaid and Managed Medicaid			606		606
Commercial			130,823		130,823
Other(1)	32,021		78,940		110,961
Eliminations of intersegment revenues	(132,325)		(14,030)		(146,355)
Total	$	10,430,581	$	957,898	$	11,388,479

(1)Other consists of management service fees earned in the respective Company line of business as well as other revenue from the Company's ancillary services.


	Year ended December 31, 2018
	U.S. dialysis		Other - Ancillary services		Consolidated
Patient service revenues:
Medicare and Medicare Advantage	$	6,063,891	$		$	6,063,891
Medicaid and Managed Medicaid	628,766				628,766
Other government	446,999		335,594		782,593
Commercial	3,176,413		101,681		3,278,094
Other revenues:
Medicare and Medicare Advantage			492,812		492,812
Medicaid and Managed Medicaid			44,246		44,246
Commercial			90,890		90,890
Other(1)	19,880		130,865		150,745
Eliminations of intersegment revenues	(92,950)		(34,236)		(127,186)
Total	$	10,242,999	$	1,161,852	$	11,404,851

(1)Other consists of management service fees earned in the respective Company line of business as well as other revenue from the Company's ancillary services.

The Company had no allowance for doubtful accounts related to performance obligations satisfied in years prior to January 1, 2018 as of December 31, 2020 and such allowance was $8,328 as of December 31, 2019.

As described in Note 1, there are significant risks associated with estimating revenue, many of which take several years to resolve. These estimates are subject to ongoing insurance coverage changes, geographic coverage differences, differing interpretations of contract coverage and other payor issues, as well as patient issues including determining applicable primary and secondary coverage, changes in patient coverage and coordination of benefits. As these estimates are refined over time, both positive and negative adjustments to revenue are recognized in the current period. As a result of these changes in estimates, no additional revenue was recognized during the year ended December 31, 2020 associated with performance obligations satisfied prior to January 1, 2018 and additional revenue of $37,274 was recognized during the year ended December 31, 2019 associated with performance obligations satisfied in years prior to January 1, 2018.

There is no single commercial payor that accounted for more than 10% of total consolidated accounts receivable or consolidated revenues at or for the years ended December 31, 2020 or 2019.

F-18

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Net dialysis services accounts receivable and other receivables from Medicare, including Medicare Advantage plans, and Medicaid, including managed Medicaid plans, were approximately $1,101,837 and $1,038,248 as of December 31, 2020 and 2019, respectively. Approximately 17% and 18% of the Company’s net patient services accounts receivable balances as of December 31, 2020 and 2019, respectively, were more than six months old. There were no significant balances over one year old at December 31, 2020. The Company's accounts receivable are principally due from Medicare and Medicaid programs and commercial insurance plans.

3. Earnings per share

Basic earnings per share is calculated by dividing net income attributable to the Company by the weighted average number of common shares outstanding, reduced for 2018 by the weighted average shares held in escrow that under certain circumstances may have been returned to the Company. Weighted average common shares outstanding include restricted stock unit awards that are no longer subject to forfeiture because the recipients have satisfied either their explicit vesting terms or retirement eligibility requirements.

Diluted earnings per share includes the dilutive effect of outstanding stock-settled stock appreciation rights and unvested stock units (under the treasury stock method) and, for 2018, the weighted average contingently returnable shares held in escrow that were outstanding during the period.

The reconciliations of the numerators and denominators used to calculate basic and diluted earnings per share were as follows:


	Year ended December 31,
	2020		2019		2018
Net income (loss) attributable to DaVita Inc.:
Continuing operations	$	783,295	$	706,832	$	624,321
Discontinued operations	(9,653)		104,149		(464,927)
Net income attributable to DaVita Inc.	$	773,642	$	810,981	$	159,394

Weighted average shares outstanding:
During the period	119,797		153,181		171,886
Contingently returnable(1)	—		—		(1,100)
Basic shares	119,797		153,181		170,786
Contingently returnable(1)	—		—		1,100
Assumed incremental from stock plans	2,826		631		479
Diluted shares	122,623		153,812		172,365

Basic net income (loss) attributable to DaVita Inc.:
Continuing operations per share	$	6.54	$	4.61	$	3.66
Discontinued operations per share	(0.08)		0.68		(2.73)
Basic net income per share attributable to DaVita Inc.	$	6.46	$	5.29	$	0.93

Diluted net income (loss) attributable to DaVita Inc.:
Continuing operations per share	$	6.39	$	4.60	$	3.62
Discontinued operations per share	(0.08)		0.67		(2.70)
Diluted net income per share attributable to DaVita Inc.	$	6.31	$	5.27	$	0.92

Anti-dilutive stock-settled awards excluded from calculation(2)	2,301		5,936		5,295

(1)Shares previously held in escrow for the DaVita HealthCare Partners merger.

(2)Shares associated with stock awards excluded from the diluted denominator calculation because they were anti-dilutive under the treasury stock method.

F-19

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

4. Restricted cash and equivalents

The Company had restricted cash and cash equivalents of $176,832 and $106,346 at December 31, 2020 and 2019, respectively. Approximately $92,286 of the balance at December 31, 2020 represents restricted cash equivalents held in trust to satisfy insurer and state regulatory requirements related to the wholly-owned captive insurance companies that bear professional and general liability and workers' compensation risks for the Company and $70,000 represents cash held in escrow to fund a previously announced legal settlement pending finalization. The remaining restricted cash and cash equivalents held at December 31, 2020 primarily represents cash pledged to third parties in connection with one of the Company's ancillary services.

5. Short-term and long-term investments

The Company’s short-term and long-term investments, consisting of debt instruments classified as held-to-maturity and equity investments with readily determinable fair values or redemption values, were as follows:


	December 31, 2020						December 31, 2019
	Debt securities		Equity securities		Total		Debt securities		Equity securities		Total
Certificates of deposit and other time deposits	$	8,217	$	—	$	8,217	$	8,140	$	—	$	8,140
Investments in mutual funds and common stock	—		44,077		44,077		—		39,951		39,951
	$	8,217	$	44,077	$	52,294	$	8,140	$	39,951	$	48,091
Short-term investments	$	8,217	$	11,884	$	20,101	$	8,140	$	3,432	$	11,572
Long-term investments	—		32,193		32,193		—		36,519		36,519
	$	8,217	$	44,077	$	52,294	$	8,140	$	39,951	$	48,091

Debt securities: The Company's short-term debt investments are principally bank certificates of deposit with contractual maturities longer than three months but shorter than one year. These debt securities are accounted for as held-to-maturity and recorded at amortized cost, which approximated their fair values at December 31, 2020 and 2019.

Equity securities: The Company's equity investments in mutual funds and common stock are held within a trust to fund existing obligations associated with several of the Company’s non-qualified deferred compensation plans. During 2020, the Company recognized pre-tax net gains of $3,818 in other income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $1,941 and a net increase in unrealized gains of $1,877. During 2019, the Company recognized pre-tax net gains of $4,383 in other income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $1,459 and a net increase in unrealized gains of $2,924.

6. Other receivables

Other receivables were comprised of the following:


	December 31,
	2020		2019
Supplier rebates and non-trade receivables	$	390,508	$	351,650
Medicare bad debt claims	153,868		138,045
	$	544,376	$	489,695

F-20

7. Property and equipment

Property and equipment were comprised of the following:


	December 31,
	2020		2019
Land	$	37,924	$	36,480
Buildings	400,616		392,256
Leasehold improvements	3,865,729		3,545,224
Equipment and information systems, including internally developed software	3,081,298		2,880,645
New center and capital asset projects in progress	616,686		588,345
	8,002,253		7,442,950
Less accumulated depreciation	(4,480,429)		(3,969,566)
	$	3,521,824	$	3,473,384

Depreciation and amortization expenses are computed using the straight-line method over the useful lives of the assets estimated as follows: buildings, 25 years to 40 years; leasehold improvements, the shorter of ten years or the expected lease term; and equipment and information systems, principally three years to 15 years. Depreciation expense on property and equipment was $616,626, $600,905, and $574,799 for 2020, 2019 and 2018, respectively.

Interest on debt incurred during the development of new centers and other capital asset projects is capitalized as a component of the asset cost based on the respective in-process capital asset balances. Interest capitalized was $17,944, $27,322 and $25,978 for 2020, 2019 and 2018, respectively.

During 2018, the Company recognized asset impairment charges of $17,338 related to the restructuring of its pharmacy business.

8. Intangible assets

Intangible assets other than goodwill were comprised of the following:


	December 31,
	2020		2019
Indefinite-lived licenses	$	100,138	$	90,209
Noncompetition agreements	84,022		103,510
Customer relationships and other	52,566		23,887
	236,726		217,606
Less accumulated amortization	(70,141)		(81,922)
	$	166,585	$	135,684

Noncompetition agreements are generally amortized over three years to 10 years and customer relationships are principally amortized over 10 years to 20 years. Amortization expense from amortizable intangible assets was $13,809, $14,247, and $16,236 for 2020, 2019 and 2018, respectively.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized no impairment charges on any intangible assets other than the goodwill impairment charges discussed in Note 10.

F-21

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Scheduled amortization expenses from amortizable intangible assets as of December 31, 2020 were as follows:


	Noncompetition agreements		Customer relationships and other
2021	$	10,274	$	3,143
2022	6,680		3,139
2023	3,883		3,102
2024	1,714		2,851
2025	585		2,660
Thereafter	168		28,248
Total	$	23,304	$	43,143

9. Equity method and other investments

The Company maintains equity method and other minor investments in the private securities of certain other healthcare and healthcare-related businesses, comprised as follows:


	December 31,
	2020		2019
APAC joint venture	$	120,787	$	116,924
Other equity method partnerships	107,599		114,611
Adjusted cost method and other investments	29,105		10,448
	$	257,491	$	241,983

During 2020, 2019 and 2018, the Company recognized equity investment income (loss) of $26,916, $12,679 and $(4,484), respectively, from its equity method investments in nonconsolidated businesses.

The Company's largest equity method investment is its ownership interest in DaVita Care Pte. Ltd. (the APAC joint venture, or APAC JV). The Company holds a 75% voting and economic interest in the APAC JV and an unrelated noncontrolling investor holds the other 25% voting and economic interest in the joint venture. During 2019 the continuing third party noncontrolling investor made its final subscribed capital contribution to the joint venture and the other previous third party noncontrolling investor elected to exit the joint venture. The governance structure and voting rights established for the APAC JV, which remain unchanged since its formation on August 1, 2016, provide that certain key decisions affecting the joint venture’s operations are not subject to the unilateral discretion of the Company but rather are under the joint control of the Company and the APAC JV's unrelated noncontrolling investor. As a result, the Company does not consolidate the APAC JV.

Prior to the transactions described above, the Company held a 60% voting interest and a 73.3% economic interest in the APAC JV, while the other two noncontrolling investors collectively held a 40% voting interest and a 26.7% economic interest in the APAC JV.

The Company's other equity method investments include 22 legal entities over which the Company has significant influence but in which it does not maintain a controlling financial interest. Almost all of these are U.S. dialysis partnerships in the form of limited liability companies. The Company's ownership interests in these partnerships vary, but typically range from 30% to 50%.

There were no significant impairments or other valuation adjustments on the Company's adjusted cost method and other investments during 2020, 2019 or 2018.

F-22

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

10. Goodwill

Changes in the carrying value of goodwill by reportable segment were as follows:


	U.S. dialysis		Other - Ancillary services		Consolidated
Balance at December 31, 2018	$	6,275,004	$	566,956	$	6,841,960
Acquisitions	18,089		72,137		90,226
Impairment charges	—		(124,892)		(124,892)
Foreign currency and other adjustments	(5,993)		(13,666)		(19,659)
Balance at December 31, 2019	$	6,287,100	$	500,535	$	6,787,635
Acquisitions	24,377		105,680		130,057
Divestitures	(1,549)		(6,744)		(8,293)
Foreign currency and other adjustments	—		9,710		9,710
Balance at December 31, 2020	$	6,309,928	$	609,181	$	6,919,109

Balance at December 31, 2020:
Goodwill	$	6,309,928	$	745,732	$	7,055,660
Accumulated impairment charges	—		(136,551)		(136,551)
	$	6,309,928	$	609,181	$	6,919,109

As dialysis treatments are an essential, life-sustaining service for patients who depend on them, the Company's operations have continued and are currently expected to continue throughout the novel coronavirus (COVID-19) pandemic. However, the ultimate impact of the dynamic and evolving COVID-19 pandemic on the Company will depend on future developments that are highly uncertain and difficult to predict, including among other things the severity and duration of the pandemic, further spread or resurgence of the virus, including as a result of the emergence of the new strains of the virus, its impact on the chronic kidney disease (CKD) patient population and the Company's patient population, the availability, acceptance, impact and efficacy of COVID-19 treatments, therapies and vaccines, the pandemic's continuing impact on the U.S. and global economies and unemployment, the responses of the Company's competitors to the pandemic and related changes in the marketplaces, and the timing, scope and effectiveness of governmental responses. While the Company does not currently expect a material adverse impact to its business as a result of this public health crisis, there can be no assurance that the COVID-19 pandemic will not have a material adverse impact on one or more of the Company's businesses.

Each of the Company’s operating segments described in Note 25 to these consolidated financial statements represents an individual reporting unit for goodwill impairment assessment purposes.

Within the U.S. dialysis operating segment, the Company considers each of its dialysis centers to constitute an individual business for which discrete financial information is available. However, since these dialysis centers have similar operating and economic characteristics, and the allocation of resources and significant investment decisions concerning these businesses are highly centralized and the benefits broadly distributed, the Company has aggregated these centers and deemed them to constitute a single reporting unit.

The Company has applied a similar aggregation to the physician practices in its physician services reporting units, to the dialysis centers and other health operations within each international reporting unit, and to the vascular access service centers in its former vascular access services reporting unit. For the Company’s other operating segments, discrete business components below the operating segment level constitute individual reporting units.

When performing quantitative goodwill impairment assessments, the Company estimates fair value using either appraisals developed with an independent third party valuation firm which consider both discounted cash flow estimates for the subject business and observed market multiples for similar businesses, or offer prices received for the subject business that would be acceptable to the Company.

During the year ended December 31, 2019, the Company recognized goodwill impairment charges of $119,476 in its Germany kidney care business. These charges resulted primarily from a decline in then current and expected future patient census and an increase in then current and expected future costs, including due to wage increases expected to result from legislation announced at that time. The changes in the Company's expectations were informed by developments in the business in response to evolving market conditions, including changes in the Company's expected timing and ability to mitigate them,

F-23

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

and based on in-depth operating and strategic reviews completed by the Company's new Germany management team. During the year ended December 31, 2019 the Company also recognized a goodwill impairment charge of $5,416 in its German other health operations.

Based on its most recent assessments, the Company determined that further changes in expected patient census, increases in operating costs, reductions in reimbursement rates, changes in actual or expected growth rates, or other significant adverse changes in expected future cash flows or valuation assumptions could result in goodwill impairment charges in the future for the following reporting unit, which remains at risk of goodwill impairment as of December 31, 2020:


Reporting unit	Goodwill balance		Carrying amount coverage(1)		Sensitivities
Operating income(2)	Discount rate(3)
Germany kidney care	$	322,736	2.3	%	(1.5)	%	(10.1)	%

(1)Excess of estimated fair value of the reporting unit over its carrying amount as of the latest assessment date.

(2)Potential impact on estimated fair value of a sustained, long-term reduction of 3% in operating income as of the latest assessment date.

(3)Potential impact on estimated fair value of an increase in discount rates of 100 basis points as of the latest assessment date.

Except as described above, none of the Company’s other reporting units were considered at risk of significant goodwill impairment as of December 31, 2020. Since the dates of the Company’s last annual goodwill impairment assessments, there have been certain developments, events, changes in operating performance and other changes in key circumstances that have affected the Company’s businesses. However, these have not caused management to believe it is more likely than not that the fair values of any of the Company’s reporting units would be less than their respective carrying amounts as of December 31, 2020.

11. Other liabilities

Other liabilities were comprised of the following:


	December 31,
	2020		2019
Payor refunds and retractions	$	371,183	$	377,044
Insurance and self-insurance accruals	54,438		58,941
Accrued interest	30,066		54,899
Accrued non-income tax liabilities	39,075		36,285
Other	315,767		229,005
	$	810,529	$	756,174

12. Income taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Income before income taxes from continuing operations consisted of the following:


	Year ended December 31,
	2020		2019		2018
Domestic	$	1,287,976	$	1,307,299	$	1,083,578
International	30,286		(111,860)		(35,100)
	$	1,318,262	$	1,195,439	$	1,048,478

F-24

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Income tax expense for continuing operations consisted of the following:


	Year ended December 31,
	2020		2019		2018
Current:
Federal	$	47,171	$	208,339	$	140,064
State	21,442		58,026		32,990
International	17,481		15,545		7,557
Total current income tax	86,094		281,910		180,611
Deferred:
Federal	198,623		44,263		52,034
State	27,206		(25,836)		21,096
International	2,009		(20,709)		4,659
Total deferred income tax	227,838		(2,282)		77,789
	$	313,932	$	279,628	$	258,400

Income taxes are allocated between continuing and discontinued operations as follows:


	Year ended December 31,
	2020		2019		2018
Continuing operations	$	313,932	$	279,628	$	258,400
Discontinued operations	1,657		40,689		99,768
	$	315,589	$	320,317	$	358,168

The reconciliation between the Company’s effective tax rate from continuing operations and the U.S. federal income tax rate is as follows:


	Year ended December 31,
	2020		2019		2018
Federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	3.4		2.3		4.1
Change in International valuation allowance	1.5		1.3		0.9

Political advocacy costs	1.7		0.2		2.3
Nondeductible executive compensation	1.2		0.8		0.7
Unrecognized tax benefits	0.4		2.4		0.2
Other	(0.6)		0.3		—
Impact of noncontrolling interests primarily attributable to non-tax paying entities	(4.8)		(4.9)		(4.6)
Effective tax rate	23.8	%	23.4	%	24.6	%

F-25

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Deferred tax assets and liabilities arising from temporary differences for continuing operations were as follows:


	December 31,
	2020		2019
Receivables	$	9,324	$	19,095
Accrued liabilities	64,982		64,458
Operating lease liabilities	584,656		580,110
Net operating loss carryforwards	167,398		139,690
Other	62,110		55,108
Deferred tax assets	888,470		858,461
Valuation allowance	(114,824)		(91,925)
Net deferred tax assets	773,646		766,536
Intangible assets	(634,736)		(563,914)
Property and equipment	(274,742)		(162,628)
Operating lease assets	(532,082)		(527,056)
Investments in partnerships	(101,996)		(64,960)
Other	(39,690)		(25,521)
Deferred tax liabilities	(1,583,246)		(1,344,079)
Net deferred tax liabilities	$	(809,600)	$	(577,543)

At December 31, 2020, the Company had federal net operating loss carryforwards of approximately $99,657 that expire through 2036, although a substantial amount expire by 2029. The Company also had state net operating loss carryforwards of $488,070, some of which have an indefinite life, although a substantial amount expire by 2040 and international net operating loss carryforwards of $296,451, some of which will begin to expire in 2021 though the majority have an indefinite life. The Company has a state capital loss carryover of $297,748, the majority of which expires in 2024. The utilization of a portion of these losses may be limited in future years based on the profitability of certain entities. A valuation allowance is recorded to account for the unrealizable balances in the table above. The net increase of $22,899 in the valuation allowance is primarily due to newly created net operating loss carryforwards in state and foreign jurisdictions that the Company does not anticipate being able to utilize.

The Company's foreign earnings continue to be indefinitely reinvested as of December 31, 2020. As a result of the passage of the Tax Cuts and Jobs Act (2017 Tax Act), the Company does not expect such earnings to be taxable if remitted.

Unrecognized tax benefits

A reconciliation of the beginning and ending liability for unrecognized tax benefits that do not meet the more-likely-than-not threshold is as follows:


	Year ended December 31,
	2020		2019
Beginning balance	$	68,214	$	40,382
Additions for tax positions related to current year	2,293		3,378
Additions for tax positions related to prior years	258		24,722
Reductions related to lapse of applicable statute	(133)		(268)
Reductions related to settlements with taxing authorities	(430)		—
Ending balance	$	70,202	$	68,214

As of December 31, 2020, the Company’s total liability for unrecognized tax benefits relating to tax positions that do not meet the more-likely-than-not threshold is $70,202, of which $66,607 would impact the Company’s effective tax rate if recognized. This balance represents an increase of $1,988 from the December 31, 2019 balance of $68,214.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2020 and 2019, the Company had approximately $17,864 and $14,428, respectively, accrued for interest and penalties related to unrecognized tax benefits, net of federal tax benefit.

F-26

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

The Company and its subsidiaries file U.S. federal and state income tax returns and various foreign income tax returns. The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2014 and 2009, respectively. In addition to being under audit in various state and local tax jurisdictions, the Company’s federal tax returns are under audit by the Internal Revenue Service for the years 2014-2017.

13. Long-term debt

Long-term debt was comprised of the following:


	December 31,					As of December 31, 2020
	2020		2019		Maturity date	Interest rate		Estimated fair value(1)
Senior Secured Credit Facilities:
Term Loan A	$	1,684,375	$	1,739,063	8/12/2024	LIBOR + 1.50%		$	1,675,953
Term Loan B-1	2,715,694		—		8/12/2026	LIBOR + 1.75%		2,702,115
Term Loan B	—		2,743,125		8/12/2026
Revolving line of credit(2)	75,000		—		8/12/2024	ABR + 0.50%		$	75,000
Senior Notes:
4.625% Senior Notes	1,750,000		—		6/1/2030	4.625	%	$	1,859,375
3.75% Senior Notes	1,500,000		—		2/15/2031	3.75	%	$	1,522,500
5.125% Senior Notes	—		1,750,000		7/15/2024
5.0% Senior Notes	—		1,500,000		5/1/2025
Acquisition obligations and other notes payable(3)	164,160		180,352		2021-2036	4.88	%	$	164,160
Financing lease obligations(4)	274,292		268,534		2021-2038	5.1	%
Total debt principal outstanding	8,163,521		8,181,074
Discount and deferred financing costs(5)	(77,717)		(72,840)
	8,085,804		8,108,234
Less current portion	(168,541)		(130,708)
	$	7,917,263	$	7,977,526

(1)For the Company's senior secured credit facilities and senior notes, fair value estimates are based upon bid and ask quotes, typically a level 2 input. For acquisition obligations and other notes payable, the carrying values presented here approximate their estimated fair values, based on estimates of their present values using level 2 interest rate inputs.

(2)The Company's interest rate for its revolving line of credit as of December 31, 2020 was based on an Alternate Base Rate (ABR or Prime Rate) plus 0.50%, or 3.75%. Effective January 6, 2021 this was converted to a LIBOR-based rate of LIBOR plus 1.50%.

(3)The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current fixed and LIBOR interest rate components in effect as of December 31, 2020.

(4)Financing lease obligations are measured at their approximate present values at inception. The interest rate presented is the weighted average discount rate embedded in financing leases outstanding. The term of one ground lease runs to 2070, in addition to the other lease maturity dates presented in the table above.

(5)As of December 31, 2020, the carrying amount of the Company's senior secured credit facilities includes a discount of $5,461 and deferred financing costs of $35,825 and the carrying amount of the Company's senior notes includes deferred financing costs of $36,431. As of December 31, 2019, the carrying amount of the Company's senior secured credit facilities included a discount of $6,457 and deferred financing costs of $45,444, and the carrying amount of the Company's senior notes included deferred financing costs of $20,939.

F-27

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Scheduled maturities of long-term debt at December 31, 2020 were as follows:


2021	$	168,541
2022	$	169,782
2023	$	227,062
2024	$	1,496,892
2025	$	69,440
Thereafter	$	6,031,804

On February 13, 2020, the Company entered into an amendment (the Repricing Amendment) to refinance and reprice its senior secured Term Loan B with a senior secured Term Loan B-1 that bears interest at a rate equal to LIBOR plus an applicable margin of 1.75% and matures on August 12, 2026. The Repricing Amendment did not change the interest rate on the Term Loan A or the revolving line of credit. No additional debt was incurred, nor any additional proceeds received, by the Company in connection with the Repricing Amendment. The majority of the Company's Term Loan B debt was considered modified in this transaction. As a result, the Company recognized debt refinancing charges of $2,948 in the year ended December 31, 2020 comprised partially of fees incurred on this transaction and partially of deferred financing costs written off for the portion of debt considered extinguished and reborrowed. For the portion of the Term Loan B debt that was considered extinguished and reborrowed in this refinancing, the Company recognized $68,842 in constructive financing cash outflows and financing cash inflows on the statement of cash flows, even though no funds were actually paid or received. Another $55,895 of the debt considered extinguished in this refinancing represented a non-cash financing activity.

During the year ended December 31, 2020, the Company made regularly scheduled mandatory principal payments under its senior secured credit facilities totaling $54,688 on Term Loan A and $27,431 on Term Loan B-1.

On June 9, 2020, the Company issued $1,750,000 aggregate principal amount of 4.625% senior notes due 2030 (the 4.625% Senior Notes) in a private offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The 4.625% Senior Notes pay interest on June 1 and December 1 of each year beginning December 1, 2020. The 4.625% Senior Notes are unsecured senior obligations and rank equally in right of payment with the Company's existing and future unsecured senior indebtedness. The 4.625% Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its senior secured credit facilities. The Company may redeem up to 40% of the aggregate principal amount of the 4.625% Senior Notes at any time prior to June 1, 2023 at 104.625% of the aggregate principal amount from the proceeds of one or more equity offerings, plus accrued and unpaid interest. In addition, the Company may redeem the 4.625% Senior Notes at any time prior to June 1, 2025 at a make-whole redemption price plus accrued and unpaid interest or, on and after such date, at certain redemption prices specified in the indenture governing these notes plus accrued and unpaid interest. The 4.625% Senior Notes contain restrictive covenants that limit the ability of the Company and its guarantors to, among other things, create certain liens, enter into certain sale/leaseback transactions, or merge, consolidate or sell all or substantially all of their assets. The 4.625% Senior Notes and related subsidiary guarantees do not have any registration or similar rights and are not expected to be registered for exchange on public markets. During the year ended December 31, 2020, the Company incurred $20,386 in fees, discounts and other professional expenses associated with this transaction that were capitalized and will amortize over the term of the 4.625% Senior Notes.

On July 15, 2020, the Company used the net proceeds from these 4.625% Senior Notes, together with cash on hand, to redeem in full all $1,750,000 aggregate principal amount outstanding of its 5.125% Senior Notes plus accrued interest and redemption premium. The Company incurred debt redemption premium charges of $29,890 and deferred financing cost write-offs of $9,764 in connection with this redemption.

On August 11, 2020, the Company issued $1,500,000 aggregate principal amount of 3.75% senior notes due 2031 (the 3.75% Senior Notes) in a private offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The 3.75% Senior Notes pay interest on February 15 and August 15 of each year beginning February 15, 2021. The 3.75% Senior Notes are unsecured senior obligations and rank equally in right of payment with the Company's existing and future unsecured senior indebtedness. The 3.75% Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its senior secured credit facilities. The Company may redeem up to 40% of the aggregate principal amount of the 3.75% Senior Notes at any time prior to August 15, 2023 at 103.75% of the aggregate principal amount from the proceeds of one or more equity offerings, plus accrued and unpaid interest. In addition, the Company may redeem the 3.75% Senior Notes at any time prior to February 15, 2026 at a make-whole redemption price plus accrued and unpaid interest or, on and after such date, at certain redemption prices specified in the indenture governing these notes plus accrued and unpaid interest. The 3.75% Senior Notes contain restrictive covenants that limit the ability of the Company and its guarantors to, among other things, create

F-28

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

certain liens, enter into certain sale/leaseback transactions, or merge, consolidate or sell all or substantially all of their assets. The 3.75% Senior Notes and related subsidiary guarantees do not have any registration or similar rights and are not expected to be registered for exchange on public markets. During the year ended December 31, 2020, the Company incurred $17,936 in fees, discounts and other professional expenses associated with this transaction that were capitalized and will amortize over the term of the 3.75% Senior Notes.

On August 21, 2020, the Company used the net proceeds from these 3.75% Senior Notes, together with cash on hand, to redeem in full all $1,500,000 aggregate principal amount outstanding of its 5.0% Senior Notes plus accrued interest and redemption premium. The Company incurred debt redemption premium charges of $37,500 and deferred financing cost write-offs of $8,866 in connection with this redemption.

The Company's 2015 interest rate cap agreements expired on June 30, 2020, at which time the Company's 2019 cap agreements became effective. As of December 31, 2020, the Company maintains several interest rate cap agreements that have the economic effect of capping the Company's maximum exposure to LIBOR variable interest rate changes on specific portions of the Company's floating rate debt, including all of the Term Loan B-1 and a portion of the Term Loan A. The remaining $900,069 outstanding principal balance of the Term Loan A and the $75,000 outstanding balance of the revolving line of credit are subject to LIBOR-based interest rate volatility. The cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. The amortization of the original cap premium is recognized as a component of debt expense on the interest method over the terms of the cap agreements. These cap agreements do not contain credit-risk contingent features.

The following table summarizes the Company’s interest rate cap agreements outstanding as of December 31, 2020 and December 31, 2019, which are classified in "Other long-term assets" on its consolidated balance sheet:


						Year ended				December 31,
						December 31, 2020				2020		2019
	Notional amount		LIBOR maximum rate	Effective date	Expiration date	Debt expense		Recorded OCI loss		Fair value
2019 cap agreements	$	3,500,000	2.00%	6/30/2020	6/30/2024	$	2,755	$	(21,781)	$	2,671	$	24,452
2015 cap agreements	$	3,500,000	3.50%	6/29/2018	6/30/2020	$	4,326	$	—	$	—	$	—

The following table summarizes the effects of the Company’s interest rate cap agreements for the years ended December 31, 2020, 2019 and 2018:


	Amount of unrealized (losses) gains in OCI on interest rate cap agreements						Location of losses		Reclassification from accumulated other comprehensive income into net income
	Year ended December 31,							Year ended December 31,
Derivatives designated as cash flow hedges	2020		2019		2018			2020			2019			2018
Interest rate cap agreements	$	(21,781)	$	1,566	$	(181)	Debt expense		$	7,081		$	8,591		$	8,466
Related income tax	5,435		(415)		48		Related income tax		(1,768)			(2,214)			(2,180)
Total	$	(16,346)	$	1,151	$	(133)			$	5,313		$	6,377		$	6,286

See Note 20 for further details on amounts recorded and reclassified from accumulated other comprehensive (loss) income.

The Company’s weighted average effective interest rate on its senior secured credit facilities at the end of 2020 was 2.03%, based upon the current margins in effect for the Term Loan A, Term Loan B-1 and revolving line of credit as of December 31, 2020.

The Company’s weighted average effective interest rate on all debt, including the effect of interest rate caps and amortization of debt discount, was 3.59% for the year ended December 31, 2020 and 3.06% as of December 31, 2020.

As of December 31, 2020, the Company’s interest rates were fixed on approximately 44.4% of its total debt.

As of December 31, 2020, the Company had $925,000 available and $75,000 drawn on its $1,000,000 revolving line of credit under its senior secured credit facilities. Credit available under this revolver is reduced by the amount of any letters of credit outstanding under this facility, but there were no such letters of credit outstanding as of December 31, 2020. The

F-29

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Company also had approximately $64,636 of outstanding letters of credit under a separate bilateral secured letter of credit facility as of December 31, 2020.

Debt expense

Debt expense consisted of interest expense of $282,932, $419,639 and $461,897 and the amortization and accretion of debt discounts and premiums, amortization of deferred financing costs and the amortization of interest rate cap agreements of $21,179, $24,185 and $25,538 for 2020, 2019 and 2018, respectively. These interest expense amounts are net of capitalized interest.

14. Leases

The Company leases substantially all of its U.S. dialysis facilities. The majority of the Company’s facilities are leased under non-cancellable operating leases which range in terms from five years to 20 years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal. Certain of the Company's leases are subject to periodic consumer price increases or contain fixed escalation clauses. See Note 1 for further information on how the Company accounts for leases.

As of December 31, 2020 and December 31, 2019, assets recorded under finance leases were $275,389 and $247,246, respectively, and accumulated amortization associated with finance leases was $49,345 and $27,193, respectively, included in property and equipment, net, on the Company's consolidated balance sheet.

In certain markets, the Company acquires and develops dialysis centers. Upon completion, the Company sells the center to a third party and leases the space back with the intent of operating the center on a long term basis. Both the sale and leaseback terms are generally market terms. The lease terms are consistent with the Company's other operating leases with the majority of the leases under non-cancellable operating leases ranging in terms from five years to 20 years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal.

The Company adopted Topic 842, Leases beginning on January 1, 2019 through a modified retrospective approach for leases existing at the adoption date with a cumulative effect adjustment. Consequently, financial information was not updated for dates and periods before January 1, 2019.

The components of lease expense were as follows:


	Year ended December 31,
Lease cost	2020		2019
Operating lease cost(1):
Fixed lease expense	$	541,090	$	526,352
Variable lease expense	122,729		119,740
Financing lease cost:
Amortization of leased assets	24,720		23,724
Interest on lease liabilities	14,421		14,932
Net lease cost	$	702,960	$	684,748

(1) Includes short-term lease expense and sublease income, which are immaterial.

Other information related to leases was as follows:


	Year ended December 31,
Lease term and discount rate	2020		2019
Weighted average remaining lease term (years):
Operating leases	8.7		9.0
Finance leases	10.5		10.2
Weighted average discount rate:
Operating leases	3.8	%	4.1	%
Finance leases	5.1	%	5.4	%

F-30

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)


	Year ended December 31,
Other information	2020		2019
Gains on sale leasebacks, net	$	34,301	$	20,833
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	661,318	$	637,655
Operating cash flows for finance leases	$	20,981	$	22,257
Financing cash flows for finance leases	$	24,780	$	25,692
Net operating lease assets obtained in exchange for new or modified operating lease liabilities	$	401,559	$	432,074

Future minimum lease payments under non-cancellable leases as of December 31, 2020 are as follows:


	Operating leases		Finance leases
2021	$	480,439	$	35,039
2022	504,789		35,124
2023	464,023		35,645
2024	412,419		35,669
2025	361,447		35,539
Thereafter	1,437,965		174,907
Total future minimum lease payments	3,661,082		351,923
Less portion representing interest	(552,915)		(77,631)
Present value of lease liabilities	$	3,108,167	$	274,292

Rent expense under all operating leases for 2020, 2019, and 2018 was $663,819, $646,092 and $596,117, respectively. Rent expense is recorded on a straight-line basis over the term of the lease, including leases that contain fixed escalation clauses or include abatement provisions. Leasehold improvement incentives are deferred and amortized to rent expense over the term of the lease. Finance lease obligations are included in long-term debt. See Note 13 for further details on long-term debt.

15. Employee benefit plans

The Company has a 401(k) retirement savings plan for substantially all of its U.S. employees which has been established pursuant to applicable provisions of the Internal Revenue Code (IRC). The plan allows for employees to contribute a percentage of their base annual salaries on a tax-deferred basis not to exceed IRC limitations. The Company maintains a 401(k) matching program under which the Company matches 50% of the employee's contribution up to 6% of the employee's salary, subject to certain limitations. The matching contributions are subject to certain eligibility and vesting conditions. For the years ended December 31, 2020, 2019 and 2018, the Company accrued matching contributions totaling approximately $70,180, $64,988 and $67,807, respectively. Prior to 2018, the Company did not provide matching contributions for its 401(k) savings plan.

The Company also maintains a voluntary compensation deferral plan, the Deferred Compensation Plan, as well as other legacy deferral plans. The Deferred Compensation Plan is non-qualified and permits certain employees whose annualized base salary equals or exceeds a minimum annual threshold amount as set by the Company to elect to defer all or a portion of their annual bonus payment and up to 50% of their base salary into a deferral account maintained by the Company. Total contributions to this plan in 2020, 2019 and 2018 were $3,637, $1,751 and $3,090, respectively. Deferred amounts are generally paid out in cash at the participant’s election either in the first or second year following retirement or in a specified future period at least three to four years after the deferral election was effective. During 2020, 2019 and 2018 the Company distributed $3,139, $2,730 and $4,652, respectively, to participants from its deferred compensation plans. Participants are credited with their proportional amount of annual earnings from the plans. The assets of these plans are held in rabbi trusts subject to the claims of the Company’s general creditors in the event of its bankruptcy. As of December 31, 2020 and 2019, the total fair value of assets held in these plans' trusts was $43,844 and $39,527, respectively. The assets of these plans are recorded at fair value with changes in fair value recorded in "Other income, net". Any fair value changes to the corresponding liability balance are recorded as compensation expense. See Note 5 for further details.

F-31

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

16. Contingencies

The majority of the Company’s revenues are from government programs and may be subject to adjustment as a result of: (i) examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (ii) differing interpretations of government regulations by different Medicare contractors or regulatory authorities; (iii) differing opinions regarding a patient’s medical diagnosis or the medical necessity of services provided; and (iv) retroactive applications or interpretations of governmental requirements. In addition, the Company’s revenues from commercial payors may be subject to adjustment as a result of potential claims for refunds, as a result of government actions or as a result of other claims by commercial payors.

The Company operates in a highly regulated industry and is a party to various lawsuits, demands, claims, qui tam suits, governmental investigations (which frequently arise from qui tam suits) and audits (including, without limitation, investigations or other actions resulting from its obligation to self-report suspected violations of law) and other legal proceedings, including, without limitation, those described below. The Company records accruals for certain legal proceedings and regulatory matters to the extent that the Company determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. As of December 31, 2020 and December 31, 2019, the Company’s total recorded accruals with respect to legal proceedings and regulatory matters, net of anticipated third party recoveries, were immaterial. While these accruals reflect the Company’s best estimate of the probable loss for those matters as of the dates of those accruals, the recorded amounts may differ materially from the actual amount of the losses for those matters, and any anticipated third party recoveries for any such losses may not ultimately be recoverable. Additionally, in some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal proceedings and regulatory matters, which also may be impacted by various factors, including, without limitation, that they may involve indeterminate claims for monetary damages or may involve fines, penalties or non-monetary remedies; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; are in the early stages of the proceedings; or may result in a change of business practices. Further, there may be various levels of judicial review available to the Company in connection with any such proceeding.

The following is a description of certain lawsuits, claims, governmental investigations and audits and other legal proceedings to which the Company is subject.

Certain Governmental Inquiries and Related Proceedings

2016 U.S. Attorney Texas Investigation: In February 2016, DaVita Rx, LLC (DaVita Rx), a wholly-owned subsidiary of the Company, received a Civil Investigative Demand (CID) from the U.S. Attorney’s Office, Northern District of Texas. The government is conducting a federal False Claims Act (FCA) investigation concerning allegations that DaVita Rx presented or caused to be presented false claims for payment to the government for prescription medications, as well as an investigation into the Company’s relationships with pharmaceutical manufacturers. The government's investigation covers the period from January 1, 2006 through December 31, 2018. In December 2017, the Company finalized and executed a settlement agreement that resolved certain of the issues in the government's investigation and that included total monetary consideration of $63,700, as previously disclosed, of which $41,500 was an incremental cash payment and $22,200 was for amounts previously refunded, and all of which was previously accrued. The government’s investigation is ongoing with respect to issues related to DaVita Rx's historic relationships with certain pharmaceutical manufacturers, and in July 2018 the OIG served the Company with a subpoena seeking additional documents and information relating to those relationships. The Company is continuing to cooperate with the government in this investigation.

2017 U.S. Attorney Colorado Investigation: In November 2017, the U.S. Attorney’s Office, District of Colorado informed the Company of an investigation it was conducting into possible federal healthcare offenses involving DaVita Kidney Care, as well as several of the Company’s wholly-owned subsidiaries. In addition to DaVita Kidney Care, the matter currently includes an investigation into DaVita Rx, DaVita Laboratory Services, Inc. (DaVita Labs), and RMS Lifeline Inc. (Lifeline). In each of August 2018 and May 2019, the Company received a CID pursuant to the FCA from the U.S. Attorney's Office relating to this investigation. In May 2020, the Company sold its interest in Lifeline, but the Company retained certain liabilities of the Lifeline business, including those related to this investigation. The Company is continuing to cooperate with the government in this investigation.

2018 U.S. Attorney Florida Investigation: In March 2018, DaVita Labs received two CIDs from the U.S. Attorney’s Office, Middle District of Florida that were identical in nature but directed to the two different labs. According to the face of the CIDs, the U.S. Attorney’s Office is conducting an investigation as to whether the Company’s subsidiary submitted claims for blood, urine, and fecal testing, where there were insufficient test validation or stability studies to ensure accurate results, in violation of the FCA. In October 2018, DaVita Labs received a subpoena from the OIG in connection with this matter

F-32

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

requesting certain patient records linked to clinical laboratory tests. On September 30, 2019, the U.S. Attorney's Office notified the U.S. District Court, Middle District of Florida, of its decision not to elect to intervene at this time in the matter of U.S. ex rel. Lorne Holland, et al. v. DaVita Healthcare Partners, Inc. et al. The court then unsealed the complaint, which alleges violations of the FCA, by order dated the same day. In January 2020, the private party relators served the Company and DaVita Labs with an amended complaint. On February 24, 2020, the Company and DaVita Labs filed a motion to dismiss the amended complaint. On June 25, 2020, the court denied the motion to dismiss. The Company and DaVita Labs answered the complaint on July 23, 2020. The Company and DaVita Labs dispute these allegations and intend to defend this action accordingly.

2020 U.S. Attorney New Jersey Investigation: In March 2020, the U.S. Attorney’s Office, District of New Jersey served the Company with a subpoena and a CID relating to an investigation being conducted by that office and the U.S. Attorney’s Office, Eastern District of Pennsylvania. The subpoena and CID request information on several topics, including certain of the Company’s joint venture arrangements with physicians and physician groups, medical director agreements, and compliance with its five-year Corporate Integrity Agreement, the term of which expired October 22, 2019. The Company is cooperating with the government in this investigation.

2020 California Department of Insurance Investigation: In April 2020, the California Department of Insurance (CDI) sent the Company an Investigative Subpoena relating to an investigation being conducted by that office. CDI issued a superseding subpoena in September 2020. The subpoena, as revised, requests information on a number of topics, including but not limited to the Company’s communications with patients about insurance plans and financial assistance from the American Kidney Fund (AKF), analyses of the potential impact of patients’ decisions to change insurance providers, and documents relating to donations or contributions to the AKF. The Company is cooperating with CDI in this investigation.

2020 Department of Justice Investigation: In October 2020, the Company received a CID from the Department of Justice pursuant to a False Claims Act investigation concerning allegations that DaVita Medical Group (DMG) may have submitted undocumented or unsupported diagnosis codes in connection with Medicare Advantage beneficiaries. The CID covers the period from January 1, 2015 through June 19, 2019, the date the Company completed the divestiture of DMG to Collaborative Care Holdings, LLC. The Company is cooperating with the government in this investigation.

Although the Company cannot predict whether or when proceedings might be initiated or when these matters may be resolved (other than as may be described above), it is not unusual for inquiries such as these to continue for a considerable period of time through the various phases of document and witness requests and on-going discussions with regulators and to develop over the course of time. In addition to the inquiries and proceedings specifically identified above, the Company frequently is subject to other inquiries by state or federal government agencies, many of which relate to qui tam complaints filed by relators. Negative findings or terms and conditions that the Company might agree to accept as part of a negotiated resolution of pending or future government inquiries or relator proceedings could result in, among other things, substantial financial penalties or awards against the Company, substantial payments made by the Company, harm to the Company’s reputation, required changes to the Company’s business practices, exclusion from future participation in the Medicare, Medicaid and other federal health care programs and, if criminal proceedings were initiated against the Company, members of its board of directors or management, possible criminal penalties, any of which could have a material adverse effect on the Company.

F-33

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Shareholder and Derivative Claims

Peace Officers’ Annuity and Benefit Fund of Georgia Securities Class Action Civil Suit: On February 1, 2017, the Peace Officers’ Annuity and Benefit Fund of Georgia filed a putative federal securities class action complaint in the U.S. District Court for the District of Colorado against the Company and certain executives. The complaint covers the time period of August 2015 to October 2016 and alleges, generally, that the Company and its executives violated federal securities laws concerning the Company’s financial results and revenue derived from patients who received charitable premium assistance from an industry-funded non-profit organization. The complaint further alleges that the process by which patients obtained commercial insurance and received charitable premium assistance was improper and "created a false impression of DaVita’s business and operational status and future growth prospects." In November 2017, the court appointed the lead plaintiff and an amended complaint was filed on January 12, 2018. On March 27, 2018, the Company and various individual defendants filed a motion to dismiss. On March 28, 2019, the court denied the motion to dismiss. The Company answered the complaint on May 28, 2019. On January 31, 2020, the plaintiffs filed a motion for class certification and the Company filed its opposition on June 29, 2020.

While the Company continues to dispute the allegations, in July 2020, it reached an agreement in principle to resolve this matter without admitting to any liability. Settlement of this matter on the agreed terms is expected to be covered primarily with insurance proceeds, with the Company contributing an amount that would not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. A motion for preliminary approval of the settlement was granted by the court on October 27, 2020. The settlement is subject to, among other things, final approval by the court.

In re DaVita Inc. Stockholder Derivative Litigation: On August 15, 2017, the U.S. District Court for the District of Delaware consolidated three previously disclosed shareholder derivative lawsuits: the Blackburn Shareholder action filed on February 10, 2017, the Gabilondo Shareholder action filed on May 30, 2017, and the City of Warren Police and Fire Retirement System Shareholder action filed on June 9, 2017. The complaint covers the time period from 2015 to present and alleges, generally, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, corporate waste, and misrepresentations and/or failures to disclose certain information in violation of the federal securities laws in connection with an alleged practice to direct patients with government-subsidized health insurance into private health insurance plans to maximize the Company’s profits. An amended complaint was filed in September 2017, and on December 18, 2017, the Company filed a motion to dismiss and a motion to stay proceedings in the alternative. On April 25, 2019, the court denied the Company's motion to dismiss. The Company answered the complaint on May 28, 2019.

While the defendants continue to dispute the allegations, in July 2020, an agreement in principle was reached to resolve this matter without admitting to any liability. The Company’s Board of Directors (Board) approved the settlement on October 20, 2020. The court granted a motion for final approval of the settlement on January 27, 2021 and approved the settlement on January 29, 2021. As part of the settlement, the Company agreed to certain corporate governance policies, but will not make any financial contribution towards the settlement.

Other Proceedings

In addition to the foregoing, from time to time the Company is subject to other lawsuits, demands, claims, governmental investigations and audits and legal proceedings that arise due to the nature of its business, including, without limitation, contractual disputes, such as with payors, suppliers and others, employee-related matters and professional and general liability claims. From time to time, the Company also initiates litigation or other legal proceedings as a plaintiff arising out of contracts or other matters.

Other than as may be described above, the Company cannot predict the ultimate outcomes of the various legal proceedings and regulatory matters to which the Company is or may be subject from time to time, including those described in this Note 16 to these consolidated financial statements, or the timing of their resolution or the ultimate losses or impact of developments in those matters, which could have a material adverse effect on the Company’s revenues, earnings and cash flows. Further, any legal proceedings or regulatory matters involving the Company, whether meritorious or not, are time consuming, and often require management’s attention and result in significant legal expense, and may result in the diversion of significant operational resources, or otherwise harm the Company’s business, results of operations, financial condition, cash flows or reputation.

F-34

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

17. Noncontrolling interests subject to put provisions and other commitments

Noncontrolling interests subject to put provisions

The Company has potential obligations to purchase the equity interests held by third parties in many of its majority-owned dialysis partnerships and other nonconsolidated entities. These noncontrolling interests subject to put provisions constitute redeemable equity interests and are therefore classified as temporary equity and carried at estimated fair value on the Company's balance sheet.

Specifically, these obligations are in the form of put provisions that are exercisable at the third-party owners’ discretion within specified periods outlined in each specific put provision. If these put provisions were exercised, the Company would be required to purchase the third-party owners’ equity interests, generally at the appraised fair market value of the equity interests or in certain cases at a predetermined multiple of earnings or cash flows attributable to the equity interests put to the Company, intended to approximate fair value. The methodology the Company uses to estimate the fair values of noncontrolling interests subject to put provisions assumes the higher of either a liquidation value of net assets or an average multiple of earnings, based on historical earnings, patient mix and other performance indicators that can affect future results, as well as other factors. The estimated fair values of noncontrolling interests subject to put provisions are a critical accounting estimate that involves significant judgments and assumptions and may not be indicative of the actual values at which the noncontrolling interests may ultimately be settled, which could vary significantly from the Company’s current estimates. The estimated fair values of noncontrolling interests subject to put provisions can fluctuate and the implicit multiple of earnings at which these noncontrolling interests obligations may be settled will vary significantly depending upon market conditions including potential purchasers’ access to the capital markets, which can impact the level of competition for dialysis and non-dialysis related businesses, the economic performance of these businesses and the restricted marketability of the third-party owners’ equity interests. The amount of noncontrolling interests subject to put provisions that employ a contractually predetermined multiple of earnings rather than fair value is immaterial.

The Company also has certain potential commitments to provide working capital funding, if necessary, to certain nonconsolidated dialysis businesses that the Company manages and in which the Company owns a noncontrolling equity interest or which are wholly-owned by third parties of approximately $8,663.

Certain consolidated dialysis partnerships are originally contractually scheduled to dissolve after terms ranging from ten years to 50 years. While noncontrolling interests in these limited life entities qualify as mandatorily redeemable financial instruments, they are subject to a classification and measurement scope exception from the accounting guidance generally applicable to other mandatorily redeemable financial instruments. Future distributions upon dissolution of these entities would be valued below the related noncontrolling interest carrying balances in the consolidated balance sheet.

Other commitments

In 2017, the Company entered into a Sourcing and Supply Agreement with Amgen USA Inc. (Amgen) that expires on December 31, 2022. Under the terms of the agreement, the Company will purchase EPO from Amgen in amounts necessary to meet no less than 90% of its requirements for erythropoiesis-stimulating agents (ESAs) through the expiration of the contract. The actual amount of EPO that the Company will purchase will depend upon the amount of EPO administered during dialysis as prescribed by physicians and the overall number of patients that the Company serves.

The Company has agreements with various suppliers to purchase established amounts of dialysis equipment, parts, and supplies. As of December 31, 2020, the remaining minimum purchase commitments under these arrangements were approximately $542,061, $540,715, $179,869, and $92,075 for the years 2021, 2022, 2023, and 2024, respectively. If the Company fails to meet the minimum purchase commitments under these contracts during any year, it is required to pay the difference to the supplier.

Other than the letters of credit disclosed in Note 13 to these consolidated financial statements, and the arrangements as described above, the Company has no off balance sheet financing arrangements as of December 31, 2020.

18. Long-term incentive compensation

Long-term incentive compensation

Long-term incentive program (LTIP) compensation includes both stock-based awards (principally stock-settled stock appreciation rights, restricted stock units and performance stock units) as well as long-term performance-based cash awards.

F-35

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Long-term incentive compensation expense, which is primarily general and administrative in nature, is attributed to the Company’s U.S. dialysis business, its corporate administrative support, and its ancillary services.

The Company’s stock-based compensation expense for stock-settled awards is measured at the estimated fair value of awards on the date of grant and recognized on a cumulative straight-line basis over the vesting terms of the awards, unless the stock awards are based on non-market-based performance metrics, in which case expense is adjusted for the ultimate number of shares expected to be issued as of the end of each reporting period. Stock-based compensation expense for cash-settled awards is based on their estimated fair values as of the end of each reporting period. The expense for all LTIP awards is recognized net of expected forfeitures.

Stock-based compensation to be settled in shares is recorded to the Company’s shareholders’ contributed capital, while stock-based compensation to be settled in cash is recorded as a liability. Shares issued upon exercise or, when applicable, vesting of stock awards, are issued from authorized but unissued shares.

Long-term incentive compensation plans

On June 11, 2020, the Company’s stockholders approved the DaVita Inc. 2020 Incentive Award Plan (the 2020 Plan). Prior to June 11, 2020 stock-based awards were granted under the DaVita Healthcare Partners Inc. 2011 Incentive Award Plan (the 2011 Plan). The 2011 Plan was terminated with respect to any new awards upon stockholder approval of the 2020 Plan. At the time the 2020 Plan was approved there were 8,730 shares of common stock available for issuance under the 2020 Plan, consisting of 5,000 newly authorized shares and 3,730 shares that were available for issuance under the 2011 Plan as of the effective date of the 2020 Plan and which became available for grant under the 2020 Plan, pursuant to the terms of the 2020 Plan.

The 2020 Plan is the Company’s current omnibus equity compensation plan and provides for grants of stock-based awards to employees, directors and other individuals providing services to the Company, except that incentive stock options may only be awarded to employees. The 2020 Plan provides for the grant of stock appreciation rights, nonqualified stock options, incentive stock options, restricted stock units, restricted stock, performance stock awards, dividend equivalents, stock payments, deferred stock unit awards, deferred stock awards and performance cash awards. The 2020 Plan mandates a maximum award term of 10 years for stock appreciation rights and stock options and stipulates that awards of these types be granted with a base or exercise price per share of not less than the fair market value of the Company's common stock on the date of grant. Shares available under the 2020 Plan are also stated on a full value share basis rather than on an option-equivalent basis. The 2020 Plan therefore provides that shares available for issuance under the plan are reduced by one share available for every four shares underlying stock appreciation rights and stock options, and are reduced by one share available for every one share underlying stock-based awards other than stock appreciation rights and stock options. At December 31, 2020, there were 8,074 shares available for future grants under the 2020 Plan. The Company’s stock units awarded under the 2020 Plan generally vest over 36 months to 48 months from the date of grant. As of December 31, 2020, no stock appreciation rights have been awarded under the 2020 Plan.

The 2011 Plan was the Company’s prior omnibus equity compensation plan and authorized the Company to award stock options, stock appreciation rights, restricted stock units, restricted stock, and other stock-based or performance-based awards. The 2011 Plan mandated a maximum award term of five years and stipulated that stock appreciation rights and stock options be granted with prices not less than fair market value on the date of grant. The 2011 Plan also required that full value share awards such as restricted stock units reduce shares available under the 2011 Plan at a ratio of 3.5:1. The Company’s stock appreciation rights and stock units awarded under the 2011 Plan generally vest over 36 months to 48 months from the date of grant.

F-36

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

A combined summary of the status of the Company’s stock-settled awards under both the 2020 Plan and 2011 Plan, including base shares for stock-settled stock appreciation rights (SSARs) and stock-settled stock unit awards is as follows:


	Year ended December 31, 2020
	Stock appreciation rights					Stock units
	Awards		Weighted average exercise price		Weighted average remaining contractual life	Awards		Weighted average remaining contractual life
Outstanding at beginning of year	6,953		$	64.10		3,160
Granted	2,765		$	68.58		1,027
Added by performance factor						19
Exercised/Vested	(894)		$	72.13		(351)
Expired	(494)		$	83.61		—
Canceled	(246)		$	61.36		(318)
Outstanding at end of period	8,084		$	63.64	3.0	3,537		1.8
Exercisable at end of period	987		$	69.56	1.0	—		—
Weighted-average fair value of grants:
2020	$	26.70				$	77.83
2019	$	14.04				$	50.58
2018	$	16.24				$	66.23


	Awards Outstanding	Weighted average exercise price		Awards exercisable	Weighted average exercise price
Range of SSARs base prices
$50.01–$60.00	2,263	$	52.53	2	$	57.88
$60.01–$70.00	5,165	$	66.99	610	$	65.95
$70.01–$80.00	656	$	75.60	375	$	75.50
Total	8,084	$	63.64	987	$	69.56

For the years ended December 31, 2020, 2019, and 2018, the aggregate intrinsic value of stock-based awards exercised was $49,258, $11,475 and $31,045, respectively. At December 31, 2020, the aggregate intrinsic value of stock-based awards outstanding was $853,803 and the aggregate intrinsic value of stock awards exercisable was $47,208.

Estimated fair value of stock-based compensation awards

The Company has estimated the grant-date fair value of stock-settled stock appreciation rights awards using the Black-Scholes-Merton valuation model and stock-settled stock unit awards at intrinsic value on the date of grant, except for portions of the Company’s performance stock unit awards for which a Monte Carlo simulation was used to estimate the grant-date fair value. The following assumptions were used in estimating these values and determining the related stock-based compensation expense attributable to the current period:

Expected term of the awards: The expected term of awards granted represents the period of time that they are expected to remain outstanding from the date of grant. The Company determines the expected term of its stock awards based on its historical experience with similar awards, considering the Company’s historical exercise and post-vesting termination patterns.

Expected volatility: Expected volatility represents the volatility anticipated over the expected term of the award. The Company determines the expected volatility for its awards based on the volatility of the price of its common stock over the most recent retrospective period commensurate with the expected term of the award, considering the volatilities expected by peer companies in near industries.

Expected dividend yield: The Company has not paid dividends on its common stock and does not currently expect to pay dividends during the term of stock awards granted.

F-37

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Risk-free interest rate: The Company bases the expected risk-free interest rate on the implied yield currently available on stripped interest coupons of U.S. Treasury issues with a remaining term equivalent to the expected term of the award.

A summary of the weighted average valuation inputs described above used for estimating the grant-date fair value of SSAR awards granted in the periods indicated is as follows:


	Year ended December 31,
	2020		2019		2018
Expected term	4.8		4.0		4.2
Expected volatility	28.2	%	29.5	%	23.8	%
Expected dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.5	%	2.2	%	2.9	%

The Company estimates expected forfeitures based upon historical experience with separate groups of employees that have exhibited similar forfeiture behavior in the past. Stock-based compensation expense is recorded only for awards that are expected to vest.

On November 4, 2019, the independent members of the Company’s Board of Directors (Board) approved an award of 2,500 premium-priced stock-settled stock appreciation rights (Premium-Priced Award) to the Company’s Chief Executive Officer (CEO), which award was subject to stockholder approval of a related amendment to the 2011 Plan. Stockholders approved such amendment to the 2011 Plan on January 23, 2020, authorizing the grant to the Company's CEO. Since stockholder approval occurred in 2020, this award was treated as granted in 2020 for accounting purposes.

The base price of the Premium-Priced Award was $67.80 per share, which was a 20% premium to the clearing price of the Company's modified Dutch auction tender offer for its shares in 2019 (2019 Tender Offer). The award vests 50% on each of November 4, 2022 and November 4, 2023 and expires on November 4, 2024. The award includes a requirement that the CEO hold any shares acquired upon exercise of this award, net of shares used to cover related taxes, until November 4, 2024 (that is, for the full term of the award), subject to lapse of the holding period upon a change in control of the Company or due to the CEO's death or termination due to disability.

Employee stock purchase plan

The Employee Stock Purchase Plan entitles qualifying employees to purchase up to $25 of the Company’s common stock during each calendar year. The amounts used to purchase stock are accumulated through payroll withholdings or through optional lump sum payments made in advance of the first day of the purchase right period. This compensatory plan allows employees to purchase stock for the lesser of 100% of its fair market value on the first day of the purchase right period or 85% of its fair market value on the last day of the purchase right period. Purchase right periods begin on January 1 and July 1, and end on December 31. Contributions used to purchase the Company’s common stock under this plan for the 2020, 2019 and 2018 purchase periods were $17,148, $16,569 and $17,398, respectively. Shares purchased pursuant to the plan’s 2020, 2019 and 2018 purchase periods were 222, 315 and 398, respectively. At December 31, 2020, there were 6,189 shares remaining available for future grants under this plan.

The fair value of participants’ purchase rights was estimated as of the beginning dates of the purchase right periods using the Black-Scholes-Merton valuation model with the following weighted average assumptions for purchase right periods in 2020, 2019 and 2018, respectively: expected volatility of 40.4%, 28.8% and 24.2%; risk-free interest rates of 1.0%, 2.6% and 1.9%, and no dividends. Using these assumptions, the weighted average estimated per share fair value of each purchase right was $22.06, $13.80 and $17.45 for 2020, 2019 and 2018, respectively.

Long-term incentive compensation expense and proceeds

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $99,643, $118,513 and $85,759, respectively, in total LTIP expense, of which $91,458, $63,705 and $73,582, respectively, was stock-based compensation expense for stock appreciation rights, stock units and discounted employee stock purchase plan purchases, which are primarily included in general and administrative expenses. The estimated tax benefits recorded for stock-based compensation in 2020, 2019 and 2018 were $11,775, $9,186 and $13,591, respectively. As of December 31, 2020, there was $189,713 of total estimated but unrecognized stock-based compensation expense under the Company’s equity compensation and employee stock purchase plans. The Company expects to recognize this expense over a weighted average remaining period of 1.4 years. The Company no longer has outstanding long-term performance-based cash awards in its principal U.S. dialysis business as the performance and accrual period for these awards ended December 31, 2019 with a final payout of $66,302 in 2020.

F-38

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

During the year ended December 31, 2018, the Company adopted a retirement policy (Rule of 65 policy). The Rule of 65 policy generally provides that Section 16 officers that are a minimum age of 55 with five years of continuous service with the Company receive certain benefits with respect to their outstanding equity awards upon a qualifying retirement if the sum of their age plus years of service is greater than or equal to 65. These benefits generally include accelerated vesting of restricted stock unit awards, continued vesting of stock-settled stock appreciation rights and performance stock unit awards and an exercise window for stock-settled stock appreciation rights from the original vest date through the original expiration date regardless of continued employment, with pro rata vesting for a Rule of 65 retirement within one year of the award grant date. The adoption of the Rule of 65 policy resulted in a $14,704 modification charge and a net acceleration of expense of $9,727 during the year ended December 31, 2018 that is included in the expense amounts reported above.

For the years ended December 31, 2020, 2019 and 2018, the Company received $8,957, $2,251 and $7,988, respectively, in actual tax benefits upon the exercise or vesting of stock awards. Since the Company issues stock-settled stock appreciation rights rather than stock options, there were no cash proceeds from stock option exercises.

19. Shareholders’ equity

Stock repurchases

The following table summarizes the Company's repurchases of its common stock during the years ended December 31, 2020, 2019 and 2018:


	2020		2019		2018
Open market repurchases
Shares	8,495		19,218		16,844
Amounts paid	$	741,850	$	1,168,321	$	1,153,511
Average paid per share	$	87.32	$	60.79	$	68.48

Tender offers (1)
Shares	7,982		21,802
Amounts paid	$	704,917	$	1,234,154
Average paid per share	$	88.32	$	56.61

Total
Shares	16,477		41,020		16,844
Amounts paid	$	1,446,767	$	2,402,475	$	1,153,511
Average paid per share	$	87.80	$	58.57	$	68.48

(1)The aggregate amounts paid for shares repurchased pursuant to the Company's 2020 and 2019 tender offers for its shares during the years ended December 31, 2020 and 2019, include their clearing prices of $88.00 and $56.50 per share, respectively, plus related fees and expenses of $2,529 and $2,343, respectively.

Subsequent to December 31, 2020 through February 10, 2021, the Company has repurchased 1,063 shares of its common stock for $123,282 at an average cost of $115.98 per share.

Effective as of the close of business on November 4, 2019, the Board terminated all remaining prior share repurchase authorizations available to the Company and approved a new share repurchase authorization of $2,000,000.

Effective on December 10, 2020, the Board terminated all remaining prior share repurchase authorizations available to the Company under the aforementioned November 4, 2019 authorization and approved a new share repurchase authorization of $2,000,000. The Company is authorized to make purchases from time to time in the open market or in privately negotiated transactions, including without limitation, through accelerated share repurchase transactions, derivative transactions, tender offers, Rule 10b5-1 plans or any combination of the foregoing, depending upon market conditions and other considerations.

As of February 10, 2021, the Company has a total of $1,806,674 available under the current repurchase authorization for additional share repurchases. Although this share repurchase authorization does not have an expiration date, the Company

F-39

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

remains subject to share repurchase limitations, including under the terms of the current senior secured credit facilities and the indentures governing the Company's senior notes.

The Company retired all shares held in its treasury effective as of December 31, 2020 and December 31, 2019.

Charter documents & Delaware law

The Company’s charter documents include provisions that may deter hostile takeovers, delay or prevent changes of control or changes in management, or limit the ability of stockholders to approve transactions that they may otherwise determine to be in their best interests. These include provisions prohibiting stockholders from acting by written consent, requiring 90 days advance notice for director nominations and stockholder proposals and granting the Company's Board of Directors the authority to issue up to 5,000 shares of preferred stock and to determine the rights and preferences of the preferred stock without the need for further stockholder approval.

The Company is also subject to Section 203 of the Delaware General Corporation Law which, subject to exceptions, prohibits the Company from engaging in any business combinations with any interested stockholder, as defined in that section, for a period of three years following the date on which that stockholder became an interested stockholder. The provisions described above may discourage, delay or prevent an acquisition of the Company at a price that stockholders may find attractive.

Changes in DaVita Inc.’s ownership interests in consolidated subsidiaries

The effects of changes in DaVita Inc.’s ownership interests in consolidated subsidiaries on the Company’s consolidated equity were as follows:


	Year ended December 31,
	2020		2019		2018
Net income attributable to DaVita Inc.	$	773,642	$	810,981	$	159,394
Changes in paid-in capital for:
Purchases of noncontrolling interests	4,364		(37,145)		(17,897)
Sales of noncontrolling interest	—		—		79
Net transfers in noncontrolling interests	4,364		(37,145)		(17,818)
Net income attributable to DaVita Inc. net of transfers in noncontrolling interests	$	778,006	$	773,836	$	141,576

The Company acquired additional ownership interests in several existing majority-owned partnerships for $7,831, $68,019, and $28,082 in 2020, 2019, and 2018, respectively.

F-40

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

20. Accumulated other comprehensive (loss) income

Charges and credits to other comprehensive (loss) income have been as follows:


	Interest rate cap agreements		Investment securities		Foreign currency translation adjustments		Accumulated other comprehensive (loss) income
Balance at December 31, 2017	$	(12,408)	$	5,662	$	19,981	$	13,235
Cumulative effect of change in accounting principle(1)	(2,706)		(5,662)		—		(8,368)
Unrealized losses	(181)		—		(45,944)		(46,125)
Related income tax	48		—		—		48
	(133)		—		(45,944)		(46,077)
Reclassification of income (loss) into net income	8,466		—		—		8,466
Related income tax	(2,180)		—		—		(2,180)
	6,286		—		—		6,286
Balance at December 31, 2018	$	(8,961)	$	—	$	(25,963)	$	(34,924)
Unrealized gains (losses)	1,566		—		(20,102)		(18,536)
Related income tax	(415)		—		—		(415)
	1,151		—		(20,102)		(18,951)
Reclassification of income into net income	8,591		—		—		8,591
Related income tax	(2,214)		—		—		(2,214)
	6,377		—		—		6,377
Balance at December 31, 2019	$	(1,433)	$	—	$	(46,065)	$	(47,498)
Unrealized losses	(21,781)		—		(7,080)		(28,861)
Related income tax	5,435		—		(543)		4,892
	(16,346)		—		(7,623)		(23,969)
Reclassification of income into net income	7,081		—		—		7,081
Related income tax	(1,768)		—		—		(1,768)
	5,313		—		—		5,313
Balance at December 31, 2020	$	(12,466)	$	—	$	(53,688)	$	(66,154)

(1)Reflects the cumulative effect of a change in accounting principle for ASUs 2016-01 and 2018-03 on classification and measurement of financial instruments and ASU 2018-02 on remeasurement and reclassification of deferred tax effects in accumulated other comprehensive income associated with the 2017 Tax Act.

The reclassification of net cap realized losses into income are recorded as debt expense in the corresponding consolidated statements of income. See Note 13 for further details.

21. Acquisitions and divestitures

Routine acquisitions

During 2020, the Company acquired eight dialysis centers in the U.S. and 66 dialysis centers outside the U.S. for a total of $182,013 in net cash, earn-outs of $14,042 and deferred purchase price and liabilities assumed of $20,415. The Company also recognized a non-cash gain of $1,821. During 2019, the Company acquired seven dialysis centers in the U.S. and 16 dialysis centers outside the U.S. for a total of $98,836 in net cash, earn-outs of $23,536, and deferred purchase price and liabilities assumed of $4,326. During 2018, the Company acquired 18 dialysis centers in the U.S. and 28 dialysis centers outside the U.S. for a total of $176,161 in net cash, earn-outs of $1,246 and deferred purchase price of $34,394. In one of these 2018 transactions the Company acquired a controlling interest in a previously nonconsolidated U.S. dialysis partnership for which the Company recognized a non-cash gain of $28,152 on its prior interest upon consolidation. The assets and liabilities for all acquisitions were recorded at their estimated fair values at the dates of the acquisitions and are included in the Company’s financial statements, as are their operating results, from the designated effective dates of the acquisitions.

F-41

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

The initial purchase price allocations for these transactions have been recorded at estimated fair values based on information available to management and will be finalized when certain information arranged to be obtained has been received. For several of the 2020 acquisitions, certain income tax amounts are pending final evaluation and quantification of any pre-acquisition tax contingencies. In addition, valuation of intangibles, leases and certain other working capital items relating to several of these acquisitions are pending final quantification.

The following table summarizes the assets acquired and liabilities assumed in these transactions and recognized at their acquisition dates at estimated fair values, as well as the estimated fair value of noncontrolling interests assumed in these transactions:


	Year ended December 31,
	2020		2019		2018
Current assets	$	23,607	$	6,713	$	23,686
Property and equipment	37,457		4,842		11,421
Customer relationships	34,625		—		—
Noncompetition agreements and other long-term assets	10,168		1,980		3,079
Indefinite-lived licenses	22,136		31,858		23,656
Goodwill	130,057		90,226		278,348
Deferred income taxes	(3,962)		—		—
Liabilities assumed	(34,068)		(7,159)		(19,946)
Noncontrolling interests assumed	(1,729)		(1,762)		(80,291)
	$	218,291	$	126,698	$	239,953

The following summarizes weighted-average estimated useful lives of amortizable intangible assets acquired during 2020, 2019 and 2018, as well as goodwill deductible for tax purposes associated with these acquisitions:


	Year ended December 31,
	2020		2019		2018
Weighted-average estimated useful lives:
Customer relationships	18
Noncompetition agreements	5		6		6

Goodwill deductible for tax purposes	$	94,318	$	88,517	$	165,013

Pro forma financial information (unaudited)

The following summary, prepared on a pro forma basis, combines the results of operations as if all acquisitions within continuing operations in 2020 and 2019 had been consummated as of the beginning of 2019, including the impact of certain adjustments such as amortization of intangibles, interest expense on acquisition financing and income tax effects.


	Year ended December 31,
	2020		2019
	(unaudited)
Pro forma total revenues	$	11,636,416	$	11,570,086
Pro forma net income from continuing operations attributable to DaVita Inc.	$	789,473	$	718,928
Pro forma basic net income per share from continuing operations attributable to DaVita Inc.	$	6.59	$	4.69
Pro forma diluted net income per share from continuing operations attributable to DaVita Inc.	$	6.44	$	4.67

F-42

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Sale of RMS Lifeline

The Company divested its vascular access business, RMS Lifeline, Inc., effective May 1, 2020 and recognized a loss on sale of approximately $16,252.

Contingent earn-out obligations

The Company has several contingent earn-out obligations associated with acquisitions that could result in the Company paying the former owners of acquired companies a total of up to approximately $42,378 if certain performance targets or quality margins are met over the next one year to five years.

Contingent earn-out obligations are remeasured to fair value at each reporting date until the contingencies are resolved with changes in the liability due to the remeasurement recognized in earnings. See Note 24 for further details. As of December 31, 2020, the Company estimated the fair value of these contingent earn-out obligations to be $30,248, of which a total of $13,025 is included in other current liabilities, and the remaining $17,223 is included in other long-term liabilities in the Company’s consolidated balance sheet.

The following is a reconciliation of changes in contingent earn-out liabilities for the years ended December 31, 2020 and 2019:


	Year ended December 31,
	2020		2019
Beginning balance	$	24,586	$	2,608
Acquisitions	14,042		23,536
Foreign currency translation	(3,688)		(905)
Fair value remeasurements	(2,630)		121
Payments or other settlements	(2,062)		(774)
Ending balance	$	30,248	$	24,586

22. Discontinued operations previously held for sale

DaVita Medical Group (DMG)

On June 19, 2019, the Company completed the sale of its DMG business to Optum, a subsidiary of UnitedHealth Group Inc., for an aggregate purchase price of $4,340,000, prior to certain closing and post-closing adjustments specified in the related equity purchase agreement dated as of December 5, 2017, as amended as of September 20, 2018 and as of December 11, 2018 (as amended, the equity purchase agreement).

The Company recorded a preliminary estimated pre-tax net loss of approximately $23,022 on the sale of its DMG business in 2019. This preliminary net loss was based on initial estimates of the Company's expected aggregate proceeds from the sale, net of transaction costs and obligations, as well as the estimated values of DMG net assets sold as of the closing date. Those estimated net proceeds included $4,465,476 in cash received from Optum at closing, or $3,824,509 net of cash and restricted cash included in the DMG net assets sold.

At close of the DMG sale, the Company's ultimate net sale proceeds remained subject to resolution of certain post-closing purchase price adjustments described in the equity purchase agreement. In the fourth quarter of 2020, the Company and Optum reached agreement on the final purchase price for the DMG sale, which resulted in an additional payment by the Company to Optum of $47,000 and an additional loss on sale of $17,976. In the first quarter of 2020, the Company recognized $9,980 in additional tax benefits under the Coronavirus Aid, Relief and Economic Security Act related to its period of DMG ownership, which were also recognized as an adjustment to the Company's loss on sale of the DMG business.

Under the equity purchase agreement, the Company also has certain continuing indemnification obligations that could require payments to the buyer relating to the Company's previous ownership and operation of the DMG business. Potential payments under these provisions, if any, remain subject to continuing uncertainties and the amounts of such payments could be significant to the Company.

F-43

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

The following table presents the financial results of discontinued operations related to DMG:


	Year ended December 31,
	2020		2019		2018
Net revenues	$	—	$	2,713,059	$	4,963,792
Expenses	—		2,543,865		4,962,686
Goodwill and other asset impairment charges	—		—		41,537
Valuation adjustment on disposal group	—		—		316,840
Income (loss) from discontinued operations before taxes	—		169,194		(357,271)
Loss on sale of discontinued operations before taxes	(7,996)		(23,022)		—
Income tax expense	1,657		40,689		99,768
Net (loss) income from discontinued operations, net of tax	$	(9,653)	$	105,483	$	(457,038)

The following table presents cash flows of discontinued operations related to DMG:


	Year ended December 31,
	2020		2019		2018
Net cash provided by operating activities from discontinued operations	$	—	$	99,634	$	290,684
Net cash used in investing activities from discontinued operations	$	—	$	(43,442)	$	(57,382)

DMG acquisitions

During the period from January 1, 2019 to June 18, 2019 immediately prior to the sale, the DMG business acquired two medical businesses for a total of $2,025 in net cash and deferred purchase price of $212. During 2018, the DMG business acquired other medical businesses for a total of $6,995 in net cash and deferred purchase price of $1,142.

23. Variable interest entities

The Company manages or maintains an ownership interest in certain legal entities subject to the consolidation guidance applicable to variable interest entities (VIEs). Almost all of these legal entities are either U.S. dialysis partnerships encumbered by guaranteed debt, U.S. dialysis limited partnerships, or other legal entities subject to nominee ownership arrangements.

Under U.S. GAAP, VIEs typically include entities for which (i) the entity’s equity is not sufficient to finance its activities without additional subordinated financial support; (ii) the equity holders as a group lack the power to direct the activities that most significantly influence the entity’s economic performance, the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected returns; or (iii) the voting rights of some investors are not proportional to their obligations to absorb the entity’s losses.

The substantial majority of VIEs the Company is associated with are U.S. dialysis partnerships which the Company manages and in which it maintains a controlling majority ownership interest. These U.S. dialysis partnerships are considered VIEs either because they are (i) encumbered by debt guaranteed proportionately by the partners that is considered necessary to finance the partnership's activities, or (ii) in the form of limited partnerships for which the limited partners are not considered to have substantive kick-out or participating rights. The Company consolidates virtually all such U.S. dialysis partnerships.

The Company also relies on the operating activities of certain legal entities in which it does not maintain a controlling ownership interest but over which it has indirect influence and of which it is considered the primary beneficiary. These entities are typically subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically include both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. The Company consolidates all of the nominee-owned entities with which it is most closely associated.

At December 31, 2020, these consolidated financial statements include total assets of VIEs above of $310,190 and total liabilities and noncontrolling interests of these VIEs to third parties of $216,632.

F-44

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

The Company also sponsors certain non-qualified deferred compensation plans whose trusts qualify as VIEs and the Company consolidates these plans as their primary beneficiary. The assets of these plans are recorded in short-term or long-term investments with related liabilities recorded in accrued compensation and benefits and other long-term liabilities. See Note 15 for disclosures concerning the assets of these consolidated non-qualified deferred compensation plans.

24. Fair values of financial instruments

The Company measures the fair value of certain assets, liabilities, and noncontrolling interests subject to put provisions (redeemable equity interests classified as temporary equity) based upon certain valuation techniques that include observable or unobservable inputs and assumptions that market participants would use in pricing these assets, liabilities, temporary equity and commitments. The Company has also classified assets, liabilities and temporary equity that are measured at fair value on a recurring basis into the appropriate fair value hierarchy levels as defined by the FASB.

The following table summarizes the Company’s assets, liabilities and temporary equity measured at fair value on a recurring basis as of December 31, 2020 and 2019:


December 31, 2020	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in equity securities	$	44,077	$	44,077	$	—	$	—
Interest rate cap agreements	$	2,671	$	—	$	2,671	$	—
Liabilities
Contingent earn-out obligations	$	30,248	$	—	$	—	$	30,248
Temporary equity
Noncontrolling interests subject to put provisions	$	1,330,028	$	—	$	—	$	1,330,028
December 31, 2019
Assets
Investments in equity securities	$	39,951	$	39,951	$	—	$	—
Interest rate cap agreements	$	24,452	$	—	$	24,452	$	—
Liabilities
Contingent earn-out obligations	$	24,586	$	—	$	—	$	24,586
Temporary equity
Noncontrolling interests subject to put provisions	$	1,180,376	$	—	$	—	$	1,180,376

For reconciliations of changes in contingent earn-out obligations and noncontrolling interests subject to put provisions during the year ended at December 31, 2020 and 2019, see Note 21 and the consolidated statement of equity, respectively.

Investments in equity securities represent investments in various open-ended registered investment companies (mutual funds) and common stock and are recorded at fair value estimated based on reported market prices or redemption prices, as applicable. See Note 5 for further discussion.

Interest rate cap agreements are recorded at fair value estimated from valuation models utilizing the income approach and commonly accepted valuation techniques that use inputs from closing prices for similar assets and liabilities in active markets as well as other relevant observable market inputs at quoted intervals such as current interest rates, forward yield curves, implied volatility and credit default swap pricing. The Company does not believe the ultimate amount that could be realized upon settlement of these interest rate cap agreements would be materially different from the fair value estimates currently reported. See Note 13 for further discussion.

The estimated fair value measurements of contingent earn-out obligations are primarily based on unobservable inputs, including projected earnings before interest, taxes, depreciation, and amortization (EBITDA) and revenue. The estimated fair value of these contingent earn-out obligations is remeasured as of each reporting date and could fluctuate based upon any significant changes in key assumptions, such as changes in the Company credit risk adjusted rate that is used to discount obligations to present value. See Note 21 for further discussion.

F-45

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

The estimated fair value of noncontrolling interests subject to put provisions is based principally on the higher of either estimated liquidation value of net assets or a multiple of earnings for each subject dialysis partnership, based on historical earnings, revenue mix, and other performance indicators that can affect future results. The multiples used for these valuations are derived from observed ownership transactions for dialysis businesses between unrelated parties in the U.S. in recent years, and the specific valuation multiple applied to each dialysis partnership is principally determined by its recent and expected revenue mix and contribution margin. As of December 31, 2020, an increase or decrease in the weighted average multiple used in these valuations of one times EBITDA would change the estimated fair value of these noncontrolling interests by approximately $160,000. See Note 17 for a discussion of the Company’s methodology for estimating the fair values of noncontrolling interests subject to put obligations.

The Company's fair value estimates for its senior secured credit facilities and senior notes are based upon quoted bid and ask prices for these instruments, typically a level 2 input. See Note 13 for further discussion of the Company's debt.

Other financial instruments consist primarily of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, other accrued liabilities, lease liabilities and debt. The balances of financial instruments other than debt and lease liabilities are presented in the consolidated financial statements at December 31, 2020 and 2019 at their approximate fair values due to the short-term nature of their settlements.

25. Segment reporting

The Company's operations are comprised of its U.S. dialysis and related lab services business (its U.S. dialysis business), its various ancillary services and strategic initiatives, including its international operations (collectively, its ancillary services), and its corporate administrative support. See Note 1 "Organization" for a summary description of the Company's businesses.

On June 19, 2019, the Company completed the sale of its DMG business to Optum. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented.

The Company’s operating segments have been defined based on the separate financial information that is regularly produced and reviewed by the Company’s chief operating decision maker in making decisions about allocating resources to and assessing the financial performance of the Company’s various operating lines of business. The chief operating decision maker for the Company is its Chief Executive Officer.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, each of its ancillary services and strategic initiatives, its kidney care operations in each foreign sovereign jurisdiction, its other health operations in each foreign sovereign jurisdiction, and its equity method investment in the APAC joint venture. The U.S. dialysis and related lab services business qualifies as a separately reportable segment, and all other ancillary services and strategic initiatives operating segments, including the international operating segments, have been combined and disclosed in the other segments category.

The Company’s operating segment financial information included in this report is prepared on the internal management reporting basis that the chief operating decision maker uses to allocate resources and assess the financial performance of the Company's operating segments. For internal management reporting, segment operations include direct segment operating expenses but generally exclude corporate administrative support costs, which consist primarily of indirect labor, benefits and long-term incentive compensation expenses of certain departments which provide support to all of the Company’s various operating lines of business, except to the extent that such costs are charged to and borne by certain ancillary services and strategic initiatives via internal management fees. These corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of business.

F-46

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

The following is a summary of segment revenues, segment operating margin (loss), and a reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:


	Year ended December 31,
	2020		2019		2018
Segment revenues:
U.S. dialysis
Patient service revenues:
External sources	$	10,488,731	$	10,421,401	$	10,274,046
Intersegment revenues	144,091		131,199		92,950
U.S. dialysis revenues before provision	10,632,822		10,552,600		10,366,996
Provision for uncollectible accounts	(13,458)		(21,715)		(50,927)
U.S. dialysis patient service revenues	10,619,364		10,530,885		10,316,069
Other revenues(1)
External sources	39,376		30,895		19,880
Intersegment revenues	1,195		1,126		—
Total U.S. dialysis revenues	$	10,659,935	$	10,562,906	$	10,335,949
Other - Ancillary services
Net patient service revenues	550,978		497,021		437,275
Other external sources	484,977		460,877		724,577
Intersegment revenues	16,743		14,030		34,236
Total ancillary services	1,052,698		971,928		1,196,088
Total net segment revenues	11,712,633		11,534,834		11,532,037
Elimination of intersegment revenues	(162,029)		(146,355)		(127,186)
Consolidated revenues	$	11,550,604	$	11,388,479	$	11,404,851
Segment operating margin (loss):
U.S. dialysis	$	1,917,604	$	1,924,826	$	1,709,721
Other - Ancillary services(2)	(76,261)		(189,174)		(93,789)
Total segment margin	1,841,343		1,735,652		1,615,932
Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:
Corporate administrative support	(146,707)		(92,335)		(90,108)
Consolidated operating income	1,694,636		1,643,317		1,525,824
Debt expense	(304,111)		(443,824)		(487,435)
Debt prepayment, refinancing and redemption charges	(89,022)		(33,402)		—
Other income	16,759		29,348		10,089
Income from continuing operations before income taxes	$	1,318,262	$	1,195,439	$	1,048,478

(1)Includes management fee revenues from providing management and administrative services to dialysis ventures in which the Company owns a noncontrolling interest or which are wholly-owned by third parties.

(2)Includes equity investment income of $5,866, $9,366, and $24,866 in 2020, 2019 and 2018, respectively.

F-47

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

Depreciation and amortization expense by reportable segment was as follows:


	Year ended December 31,
	2020		2019		2018
U.S. dialysis	$	594,552	$	583,454	$	558,810
Other - Ancillary services	35,883		31,698		32,225
	$	630,435	$	615,152	$	591,035

Summary of assets by reportable segment was as follows:


	Year ended December 31,
	2020		2019
Segment assets
U.S. dialysis(1)	$	15,344,647	$	15,778,880
Other - Ancillary services(2)	1,643,869		1,532,514
Consolidated assets	$	16,988,516	$	17,311,394

(1)Includes equity method and other investments of $122,974 and $124,188 in 2020 and 2019, respectively.

(2)Includes equity method and other investments of $134,517 and 117,795 in 2020 and 2019, respectively and includes approximately $181,137 and $154,572 in 2020 and 2019, respectively, of net property and equipment related to the Company’s international operations.

Expenditures for property and equipment by reportable segment were as follows:


	Year ended December 31,
	2020		2019		2018
U.S. dialysis	646,870		$	681,339	$	856,108
Other - Ancillary services	27,671		46,741		45,806
DMG - Discontinued operations	—		38,466		85,224
	$	674,541	$	766,546	$	987,138

26. Supplemental cash flow information

The table below provides supplemental cash flow information:


	Year ended December 31,
	2020		2019		2018
Cash paid:
Income taxes, net	$	154,850	$	157,983	$	92,526
Interest	$	326,165	$	473,176	$	488,974
Non-cash investing and financing activities:
Fixed assets under financing lease obligations	$	22,042	$	18,953	$	8,828

F-48

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars and shares in thousands, except per share data)

27. Selected quarterly financial data (unaudited)


	December 31,		September 30,		June 30,		March 31,
2020
Total revenues	$	2,905,322	$	2,924,066	$	2,879,979	$	2,841,237
Operating income	$	381,671	$	437,669	$	409,920	$	465,376
Attributable to DaVita Inc.:
Net income from continuing operations(1)	$	193,406	$	158,674	$	201,602	$	229,613
Net (loss) income from discontinued operations	(19,633)		—		—		9,980
Net income	$	173,773	$	158,674	$	201,602	$	239,593
Per share attributable to DaVita Inc.:
Basic net income from continuing operations	$	1.73	$	1.31	$	1.65	$	1.84
Basic net (loss) income from discontinued operations	(0.17)		—		—		0.08
Basic net income	$	1.56	$	1.31	$	1.65	$	1.92
Diluted net income from continuing operations	$	1.67	$	1.28	$	1.62	$	1.81
Diluted net (loss) income from discontinued operations	(0.17)		—		—		0.08
Diluted net income	$	1.50	$	1.28	$	1.62	$	1.89
2019
Total revenues	$	2,898,584	$	2,904,078	$	2,842,705	$	2,743,112
Operating income	$	462,588	$	378,336	$	461,886	$	340,507
Attributable to DaVita Inc.:
Net income from continuing operations(1)	$	242,242	$	150,113	$	194,223	$	120,254
Net (loss) income from discontinued operations	2,629		(6,843)		79,328		29,035
Net income	$	244,871	$	143,270	$	273,551	$	149,289
Per share attributable to DaVita Inc.:
Basic net income from continuing operations	$	1.87	$	1.00	$	1.17	$	0.72
Basic net income (loss) from discontinued operations	0.02		(0.05)		0.47		0.18
Basic net income	$	1.89	$	0.95	$	1.64	$	0.90
Diluted net income from continuing operations	$	1.86	$	0.99	$	1.16	$	0.72
Diluted net income (loss) from discontinued operations	0.02		(0.04)		0.48		0.18
Diluted net income	$	1.88	$	0.95	$	1.64	$	0.90

(1)The following table summarizes impairment charges, loss on changes in ownership interest, and a legal settlement included in operating expenses and charges in 2020 and 2019 by quarter:


	Quarter ended					Quarter ended
	December 31, 2020	September 30, 2020	June 30, 2020		March 31, 2020	December 31, 2019	September 30, 2019		June 30, 2019	March 31, 2019
Certain operating expenses and charges:
Impairment charges							$	83,855		$	41,037
Loss on changes in ownership interest, net			$	16,252
Accruals for legal matters			$	35,000

F-49

EXHIBIT INDEX


2.1						Equity Purchase Agreement, dated as of December 5, 2017, by and among DaVita Inc., Collaborative Care Holdings, LLC, and solely with respect to Section 9.3 and Section 9.18 thereto, UnitedHealth Group Incorporated.(2)

2.2						Amendment No. 1 dated as of September 20, 2018, to that certain Equity Purchase Agreement, dated as of December 5, 2017, by and among DaVita, Inc., a Delaware corporation, Collaborative Care Holdings, LLC, a Delaware limited liability company and a wholly owned subsidiary of Optum, Inc., and solely with respect to Section 9.3 and Section 9.18 thereto, UnitedHealth Group Incorporated, a Delaware corporation.(22)

2.3						Second Amendment to Equity Purchase Agreement by and between DaVita, Inc., a Delaware corporation, and Collaborative Care Holdings, LLC, a Delaware limited liability company, dated as of December 11, 2018, amending that certain Equity Purchase Agreement, dated as of December 5, 2017, by and among DaVita, Inc., Collaborative Care Holdings, LLC, and, solely with respect to Section 9.3 and Section 9.18 thereto, UnitedHealth Group Incorporated (as previously amended).(11)

3.1						Restated Certificate of Incorporation of DaVita Inc., as filed with the Secretary of State of Delaware on November 1, 2016.(1)

3.2						Amended and Restated Bylaws for DaVita Inc. dated as of December 10, 2020.(33)

4.1						Indenture for the 4.625% Senior Notes due 2030, dated as of June 9, 2020, by and among DaVita Inc., the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee.(20)

4.2						Form of 4.625% Senior Notes due 2030 and related Guarantee (included in Exhibit 4.1).(20)

4.3						Indenture for the 3.750% Senior Notes due 2031, dated August 11, 2020, by and among DaVita Inc., the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee.(17)

4.4						Form of 3.750% Senior Notes due 2031 and related Guarantee (included in Exhibit 4.3).(17)

4.5						Description of Securities.(28)

10.1						Sourcing and Supply Agreement between DaVita Inc. and Amgen USA Inc. effective as of January 6, 2017.(5)**

10.2						Credit Agreement, dated August 12, 2019, by and among DaVita Inc., certain subsidiary guarantors party thereto, the lenders party thereto, Credit Agricole Corporate and Investment Bank, JPMorgan Chase Bank, N.A. and MUFG Bank Ltd., as co-syndication agents, Bank of America, N.A., Barclays Bank PLC, Credit Suisse Loan Funding LLC, Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc. and Suntrust Bank, as co-documentation agents, and Wells Fargo Bank, National Association, as administrative agent, collateral agent and swingline lender.(24)

10.3						First Amendment, dated as of February 13, 2020, to that certain Credit Agreement, dated as of August 12, 2019, by and among DaVita Inc., certain subsidiary guarantors party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, collateral agent and swingline lender.(28)

10.4						Employment Agreement, effective July 25, 2008, between DaVita Inc. and Kent J. Thiry.(12)*

10.5						Amendment to Employment Agreement, effective December 31, 2014, by and between DaVita Inc. and Kent. J. Thiry.(3)*

10.6						Amendment Number Two to Employment Agreement, effective August 20, 2018, by and between DaVita Inc. and Kent J. Thiry.(23)*

Page 1 of 5


10.7						Executive Chairman Agreement between Kent J. Thiry and DaVita, Inc., dated as of April 29, 2019.(13)*

10.8						Restricted Stock Units Agreement, effective as of May 15, 2019, by and between DaVita Inc. and Kent Thiry.(25)*

10.9						Performance Stock Units Agreement, effective as of May 15, 2019, by and between DaVita Inc. and Kent Thiry.(25)*

10.10						Employment Agreement, dated as of April 29, 2019, by and between Javier J. Rodriguez and DaVita Inc.(13)*

10.11						Stock Appreciation Rights Agreement, effective November 4, 2019, by and between Javier J. Rodriguez and DaVita Inc.(27)*

10.12						Employment Agreement, effective February 21, 2017, by and between DaVita Inc. and Joel Ackerman.(8)*

10.13						Employment Agreement, effective April 27, 2016, by and between DaVita HealthCare Partners Inc. and Kathleen A. Waters.(5)*

10.14						Employment Agreement, effective September 22, 2005, by and between DaVita Inc. and James Hilger.(7)*

10.15						Amendment to Mr. Hilger’s Employment Agreement, effective December 12, 2008.(15)*

10.16						Second Amendment to Mr. Hilger’s Employment Agreement, effective December 27, 2012.(18)*

10.17						Third Amendment to Employment Agreement, effective December 31, 2014, by and between DaVita Inc. and James Hilger.(3)*

10.18						Transition Agreement, dated as of July 31, 2018, by and between DaVita Inc. and James Hilger.(21)*

10.19						Employment Agreement, effective April 29, 2015, by and between DaVita HealthCare Partners Inc. and Michael Staffieri.(28)*

10.20						Amendment to Stock Appreciation Rights Agreements, effective June 11, 2020, by and between DaVita Inc. and William L. Roper, M.D.(30)*

10.21						Transition Agreement, dated October 1, 2020, by and between DaVita Inc. and LeAnne Zumwalt.(32)*

10.22						Form of Indemnity Agreement.(10)*

10.23						Form of Indemnity Agreement.(6)*

10.24						DaVita Deferred Compensation Plan.(8)*

10.25						DaVita Voluntary Deferral Plan.(4)*

10.26						Deferred Bonus Plan (Prosperity Plan).(14)*

10.27						Amendment No. 1 to Deferred Bonus Plan (Prosperity Plan).(15)*

10.28						Amended and Restated Employee Stock Purchase Plan.(26)*

10.29						DaVita Inc. Severance Plan for Directors and Above.(3)*

Page 2 of 5


10.30						DaVita Inc. Non-Employee Director Compensation Policy.(16)*

10.31						Amended and Restated DaVita Inc. 2011 Incentive Award Plan.(9)*

10.32						Amendment No. 1 to the Amended and Restated DaVita Inc. 2011 Incentive Award Plan.(27)*

10.33						DaVita Inc. 2020 Incentive Award Plan.(29)*

10.34						DaVita Inc. Rule of 65 Policy, adopted on August 19, 2018.(23)*

10.35						Form of Stock Appreciation Rights Agreement-Board members (DaVita Inc. 2011 Incentive Award Plan).(21)*

10.36						Form of Stock Appreciation Rights Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(18)*

10.37						Form of Restricted Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(19)*

10.38						Form of Long-Term Incentive Program Award Agreement (For 162(m) designated teammates) (DaVita Inc. 2011 Incentive Award Plan).(18)*

10.39						Form of Long-Term Incentive Program Award Agreement (DaVita Inc. 2011 Incentive Award Plan).(18)*

10.40						Form of Restricted Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(25)*

10.41						Form of Performance Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(25)*

10.42						Form of Stock Appreciation Rights Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(25)*

10.43						Form of Restricted Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(25)*

10.44						Form of Performance Stock Units Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(25)*

10.45						Form of Stock Appreciation Rights Agreement-Executives (DaVita Inc. 2011 Incentive Award Plan).(25)*

10.46						Form of Stock Appreciation Rights Agreement (DaVita Inc. 2020 Incentive Award Plan).(31)*

10.47						Form of Performance-Based Restricted Stock Unit Agreement (DaVita Inc. 2020 Incentive Award Plan).(31)*

10.48						Form of Restricted Stock Unit Agreement (DaVita Inc. 2020 Incentive Award Plan).(31)*

21.1						List of our subsidiaries.ü

23.1						Consent of KPMG LLP, independent registered public accounting firm.ü

24.1						Powers of Attorney with respect to DaVita. (Included on Page S-1).

31.1						Certification of the Chief Executive Officer, dated February 12, 2021, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.ü

31.2						Certification of the Chief Financial Officer, dated February 12, 2021, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.ü

Page 3 of 5


32.1						Certification of the Chief Executive Officer, dated February 12, 2021, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.ü

32.2						Certification of the Chief Financial Officer, dated February 12, 2021, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.ü

101.INS						XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.ü

101.SCH						Inline XBRL Taxonomy Extension Schema Document.ü

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.ü

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.ü

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.ü

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.ü

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).ü


ü			Included in this filing.
*			Management contract or executive compensation plan or arrangement.
**			Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the SEC.

(1)Filed on November 2, 2016 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.

(2)Filed on December 6, 2017 as an exhibit to the Company’s Current Report on Form 8-K.

(3)Filed on February 22, 2019 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

(4)Filed on November 8, 2005 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(5)Filed on May 2, 2017 as an exhibit to the Company’s Quarterly Report on 10-Q for the quarter ended March 31, 2017.

(6)Filed on March 3, 2005 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(7)Filed on August 7, 2006 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2006.

(8)Filed on February 24, 2017 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

(9)Filed on April 28, 2014 as Appendix A to the Company's Definitive Proxy Statement on Schedule 14A.

(10)Filed on December 20, 2006 as an exhibit to the Company’s Current Report on Form 8-K.

(11)Filed on December 17, 2018 as an exhibit to the Company’s Current Report on Form 8-K.

(12)Filed on July 31, 2008 as an exhibit to the Company’s Current Report on Form 8-K.

(13)Filed on April 29, 2019 as an exhibit to the Company's Current Report on Form 8-K.

(14)Filed on February 29, 2008 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

(15)Filed on February 27, 2009 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

(16)Filed on May 5, 2020 as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

(17)Filed on August 11, 2020 as an exhibit to the Company’s Current Report on Form 8-K.

(18)Filed on March 1, 2013 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Page 4 of 5

(19)Filed on August 4, 2011 as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.

(20)Filed on June 9, 2020 as an exhibit to the Company's Current Report on Form 8-K.

(21)Filed on August 1, 2018 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.

(22)Filed on September 24, 2018 as an exhibit to the Company’s Current Report on Form 8-K.

(23)Filed on August 23, 2018 as an exhibit to the Company’s Current Report on Form 8-K.

(24)Filed on August 14, 2019 as an exhibit to the Company’s Current Report on Form 8-K.

(25)Filed on July 22, 2019 as an exhibit to the Company’s Tender Offer Statement on Schedule TO-I.

(26)Filed on May 10, 2016 as an appendix to the Company's Proxy Statement on DEF 14A.

(27)Filed on December 6, 2019 as an appendix to the Company's Proxy Statement on DEF 14A.

(28)Filed on February 21, 2020 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(29)Filed on April 27, 2020 as an appendix to the Company's Proxy Statement on DEF 14A.

(30)Filed on July 30, 2020 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

(31)Filed on August 17, 2020 as an exhibit to the Company’s Tender Offer Statement on Schedule TO-I.

(32)Filed on October 29, 2020 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

(33)Filed on December 10, 2020 as an exhibit to the Company’s Current Report on Form 8-K.

Page 5 of 5

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this Annual Report on Form 10-K to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on February 12, 2021.


DAVITA INC.

By:						/S/ JAVIER J. RODRIGUEZ
						Javier J. Rodriguez Chief Executive Officer

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Javier J. Rodriguez, Joel Ackerman, and Kathleen Waters, and each of them his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

S-1


Signature	Title	Date

/S/ JAVIER J. RODRIGUEZ	Chief Executive Officer and Director	February 12, 2021
Javier J. Rodriguez	(Principal Executive Officer)

/S/ JOEL ACKERMAN	Chief Financial Officer and Treasurer	February 12, 2021
Joel Ackerman	(Principal Financial Officer)

/S/ JOHN D. WINSTEL	Chief Accounting Officer	February 12, 2021
John D. Winstel	(Principal Accounting Officer)

/S/ PAMELA M. ARWAY	Director	February 12, 2021
Pamela M. Arway

/S/ CHARLES G. BERG	Director	February 12, 2021
Charles G. Berg

/S/ BARBARA J. DESOER	Director	February 12, 2021
Barbara J. Desoer

/S/ PAUL J. DIAZ	Director	February 12, 2021
Paul J. Diaz

/S/ SHAWN M. GUERTIN	Director	February 12, 2021
Shawn M. Guertin

/S/ JOHN M. NEHRA	Director	February 12, 2021
John M. Nehra

/S/ PAULA A. PRICE	Director	February 12, 2021
Paula A. Price

/S/ PHYLLIS R. YALE	Director	February 12, 2021
Phyllis R. Yale

S-2

DAVITA INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS


	Balance at beginning of year		Acquisitions		Amounts charged to income		Amounts written off		Balance at end of year
Description
	(dollars in thousands)
Allowance for uncollectible accounts:
Year ended December 31, 2020	$	8,328	$	—	$	13,458	$	21,786	$	—
Year ended December 31, 2019	$	52,924	$	—	$	21,715	$	66,311	$	8,328
Year ended December 31, 2018	$	218,399	$	—	$	42,287	$	207,762	$	52,924

S-3

Previous: Item 15. Exhibits, Financial Statement Schedules.